Utah-based Podium is now valued at $3 billion. Small business software helps everyone from plumbers to dentists communicate with customers online. $100m+ ARR and IPO looming, CEO says https://t.co/XMFSkJncnq
— Katie Roof, boosted 💉 (@Katie_Roof) November 15, 2021
In 2019, Eric Rea, CEO and co-founder of Podium, came to SaaStr Europa to share how he grew the company he launched from his spare bedroom into one of the fastest-growing SaaS companies.
In 2021, they passed a $3B valuation. We thought it might be great to look back on this session on how Podium got there, and to the first $60m in ARR. Video, podcast, and an updated transcript below:
Eric Rea | CEO @ Podium
Most businesses don’t have a great way to make it easy for customers to choose them. I just thought there should be a way to get their customers to review them on the sites that matter.
My goal was that every time we reached out to a customer of one of our clients that they feel like it’s a really personalized, individual engagement versus some spammy email. We put $750 each into this business, and we thought, I was like, oh man, that’s, we’re crazy. What are we doing? We did not spend money on anything except for getting customers or building something people wanted.
Hey, everybody. My name’s Eric Rea. I’m 33 years old, and I’m the co-founder and CEO of a company called Podium. And I’m here today, and I’m pumped to be here in Paris, France especially because in the past five years my co-founder, Dennis, and I have built a SaaS company outside of Silicon Valley from zero to $60 million of ARR in four years. And I am pumped to share how we’ve done that, and how we think that being outside of Silicon Valley today is a massive strength for any business.
So there are three things that I’m hoping we can get out of today together:
- Number one, I’m going to share some interesting stories about zero to 60 million in ARR for us. And I hope you relate to those.
- Number two, I hope that you can understand by the end of my talk that building your company outside of Silicon Valley, if you do it the right way, can be one of the greatest strengths for your business.
- And then number three, if we don’t get those two, then I hope that just my stories alone will be entertaining to you.
So let’s start out with a story. Podium started in 2014 in Lehi, Utah, which 10 years ago was nothing but farmland. And Dennis and I started the company because we saw a huge need for local businesses to get reviews online, and nobody was doing it. So we decided to start. And a little bit about Dennis and I, we are both first-time founders. We didn’t go to a fancy school, and we just knew that there was this problem to be solved. And so we decided to go out and solve it. And we raised a little bit of seed money in 2014. And we realized that the next stage of Podium was likely that we were going to have to raise from VCs.
So by this point, we did know what that, what it meant, but we just didn’t know how to get in touch with them. Luckily in 2014, we got email from a very prestigious Bay area firm, and if I told you their name, you’d all recognize it. They’re awesome. They’ve made tons of great investments. And it was from an analyst there, and this analyst said, “Hey guys, I’m going to be in Utah in two weeks visiting another company. I’d love to come by and hear about Podium.” So Dennis and I are super pumped about this. We’re like, yes. This is our chance. We’re going to get on their radar. We know all other VCs talk to each other, so we’ll get on the radar, and we’ll eventually be able to raise a series A.
So the date comes. Two weeks goes by. First thing that happens is I get a phone call from this analyst, and he’s like, “Hey Eric, I am outside of the address that you gave me in Provo, Utah. But I’m like outside of a hundred year old bike shop, so there’s absolutely no way that this is your office.” And I had to reassure him, yes, it was. We were actually operating in the attic above the crappy bike shop, and he had to go around the back of the building and up a creepy staircase into our office. So first off, it was not starting well.
So he comes up, and again, Dennis and I are so prepared. We even had a deck. We were like, we just wanted to nail this. So we sit down. We’re supposed to spend 60 minutes together. And we sit down. We start talking about Podium, and 20 minutes in, no joke, he gets up, says, “Guys, I got to go. I got to go to my next meeting.” Kind of like fumbles around with his words, and then just bolts out of our office.
Dennis and I were devastated. We were like, oh my gosh, if we can’t even keep the attention of an analyst for 20 minutes, how are we ever going to be able to raise a series A or get the attention of a partner? So we were really devastated. And at the time, we thought, you know what the problem is we’re this Utah tech company, and nobody takes us seriously. So that’s just going to be the problem. We’re going to have to probably raise money only in Utah. That’s going to be a huge struggle. The irony of that story is if that firm would’ve invested $1 million into Podium at that time, today it would be worth over $200 million. So what four years ago felt like a huge disadvantage, today being outside of Silicon Valley feels like one of the greatest strengths of our company. And I’m so pumped to talk to you guys about that.
So a little bit more about Podium so you actually know what Podium does. We are a platform that allows local businesses to communicate with anybody, whether it’s a lead, a customer, an employee of their business, or even another business. And we are this platform that all local businesses build their business off of. And it just makes, it makes interacting with local businesses, like dentists or car dealership feel more like the 21st century, and less like the 20th century. So that’s what Podium does.
We have 550 employees. We’ve raised $92 million from firms like Excel, IVP, Google Ventures, and Summit. And last year we were named on Forbes Cloud 100, which was awesome. I think we’re one of the youngest companies to ever be named on that list. And then this year, Oh, this year we were named as one of Fast Company’s most innovative companies in the world, which we’re super pumped to be a part of. So that’s a little bit about Podium.
Now there are four phases that are very distinct in my mind that I want to talk about today, going from zero to 60 in four years. First phase is zero to one. Now the first, the only thing when we were going from zero to one, this is in 2014, the only thing we cared about was product-market fit. And before we even started Podium, we didn’t, again, we’re first time founders. So if you get anything out of today, you should get out of this, that if we can do this, you definitely can do it because we went to a university you’ve never heard of. We had no context. We’d never even worked in software. And we’ve been able to do this.
So starting out, we didn’t really know what to do, but luckily we had heard of Paul Graham and Y Combinator, so we read all of their essays before we decided to invest $750 each into Podium, which was actually the only money we ever put into the company. It’s pretty good return on investment so far. So we read their essays, and we learned that the key to that first year is you have to nail product-market fit or else you’ll die. And so in that first year, the only things Dennis and I worried about were building something people wanted, and then trying to get it into as many businesses’ hands as possible and having them pay us for it.
So like a typical day for us was we’d wake up at 6:00 AM, and we would work out, and then at 8:00 AM, we would get in the car, and we would literally drive around Utah, walking into local businesses and selling them our product. And then in the afternoon what we would do is we would come back to the spare bedroom of my apartment, and we would take all of that feedback that we got in the morning and actually build it into our product.
So we built this amazing feedback loop. So every day we were getting feedback and actually building that into our product. And product-market fit is really important in the first year of your business for the obvious reason that if you don’t get it, you will die. But there’s a second reason that I think is incredibly important that’s not as obvious. And there’s a story that kind of illustrates this for us.
So in 2014, again, Dennis and I had started Podium, and we got a meeting with a very influential entrepreneur. This person had started multiple companies, sold them. We like idolize this guy. So we got a meeting with him, we went and met at his office, and we started telling him about Podium. Sounds familiar to the VC story, started telling him about Podium. No, not only, so this last time, it was 20 minutes in. This time, five minutes in this guy who’s really friendly and really enthusiastic, like with a big smile on his face, says, “Guys, I am so concerned about your business model.” And I remember Dennis and I looked at each other like, oh shit. It sucked. And then he continued to explain why. He was like, you’re in the wrong market. You’re selling to the wrong customers. Your product is solving too niche of a problem. And he just went on and on, and at the end of that, he just flat out said, “I think you guys are going to fail.”
So Dennis and I are sitting there. I remember driving home in the car that night. We had just been told by this person we idolized that our business was going to fail. And we started talking about what we were going to do. And like a couple of things came up. We were, we’ve talked about pivoting into a different product or solving a different problem. We talked about going up into the enterprise, which is what this person suggested. We even considered giving our money back that we had raised.
Luckily, we decided to sleep on it. The next morning we woke up, got into the office which was a spare bedroom in my apartment and we started to realize that although this guy who had a lot of experience and was really smart had that opinion, we had dozens and dozens of customers who were paying us every month and weren’t canceling, and were getting tons of value out of our products. The product-market fit and that validation that it provides gave us what we needed to continue on when people that we respected and idolized were telling us that it wasn’t going to work.
Outside of Silicon Valley, I think that all of us here are at far more risk of quitting because people just won’t believe in what we’re doing. When you start a company, you’ll be told that what you’re doing isn’t going to work by other entrepreneurs, definitely by investors. You’ll even be told that by friends and family and if you don’t have product-market fit, it’s just not going to work. So, that was huge. That was zero to one.
Next phase of the business for us was one to 10 million. That took about a year, a little longer than a year but we went from one to 10 million of ARR. The whole theme of that year for us was building our credibility network. Now, what I mean when I say credibility network is when you start a business, you need people around you to make it work and when we started, like I said before, we had none of that. And so, you need to build a network of other entrepreneurs, investors that can potentially give you money and employees.
The one way we thought of doing that in the early days was applying to Y Combinator. Again, we were kind of obsessed with YC. We never thought we would actually go to it, but we decided to apply in 2015. We made this cheesy video that they make you do and then we sent it in. We weren’t really hopeful again, because we were told by this entrepreneur we weren’t good and we were told by this other VC analyst that we aren’t good, but we submitted it.
Luckily, we got an invitation to fly out to Mountain View, California, and interview in person for YC. So we flew out and we went to YC headquarters. I remember we were sitting down on the couches waiting to get interviewed by Jessica Livingston and a couple other partners. We were sitting there and there was a group of entrepreneurs on our right and a group of entrepreneurs on our left and they were both also interviewing.
We asked the team on the right what they did and they were like, “Well, we’re MIT graduates and we’re building robotic farming equipment.” We were like, “Whoa, that is really cool.” Then we looked at the, we started talking to the people on our left and we were like, “What do you do?” They’re like, “Well, we’re basically, we’re from essentially what is the MIT of Russia and we’re building this AI platform.” They went into detail about how amazing it was and they were like, “What do you guys do?”
Dennis and I were like, “Well, we’re from Utah. We went to a school that you’ve never heard of and we’re building this app for local businesses, like tire shops and dentists.” That sunk in to us and we just got super nervous. We were like, “Oh no, what are we doing? Why did we even fly out here? This is insane.” Then we got … Right after that, we went in and interviewed. The interview went okay, well you’re never too sure how those go.
Luckily because we had product-market fit, right before we got on the plane to fly back to Utah, we got a phone call from Aaron Harris who’s a partner at YC and he said, “Guys, we think you’re going to figure out a lot during YC but because of your product-market fit, we want you to join the next batch.” That was a huge turning point for us in our company. Three reasons YC was awesome, and YC for us was building our credibility network.
Three reasons why that was awesome. Number one, we were able to tap into the YC network. Now, that is the partners of course, but it’s also now thousands of other founders. A lot of them are in the exact same space as you and the exact same spot and so you get a lot of, you just get a lot of knowledge from that network.
Second reason is we got to listen to some of the most iconic founders at the most iconic tech companies. We got to listen to the founders of Reddit, we got to hear from the founders of Airbnb. We even got to have a one on one meeting with Joe Gebbia, one of the co-founders of Airbnb, which was like meeting a celebrity for us at the time. Then we also had a meeting that was really impactful with Andrew Mason, the cofounder of Groupon.
We were really excited to meet with him. We had a one on one meeting for about an hour and we liked that because he’s, you know, Groupon was focused on local businesses and we were focused on local businesses too. We met with him and he said two really important things that stuck with us. The first thing he said was, “Guys, I know your market and I understand what you’re doing, and I think you’re going to be a really big business so don’t worry about that. Just operate your business, hire good people.”
But, the second piece of advice he gave was incredibly impactful for us. He again looked us in the eyes and really seriously said, “Don’t fuck up your culture.” Dennis and I, I mean we’re from Utah. The F word is not a big thing in Utah, so we were taken aback and it really impacted us. He just said when they were building Groupon, the one thing that they didn’t focus on as much was building a great culture and then they grew so quickly, it became impossible to pull it back.
That year for us, the year of 2015, we went from less than 10 employees to over 100 and because of the advice that Andrew Mason gave us, we focused on our values, we started hiring based on our values. We decided to make a really focused effort on our culture, which I think was a pivotal, pivotal point for Podium. Because before that we were just thinking, what is a culture? A culture is just like, we’re five people in a room, right? So, that was really important.
The third thing that YC and our credibility network did for us is, we went from being a Utah company to a YC company that was based in Utah and that was huge for us with investors. Those are the three things. That year, we focused a ton on building out our network and the big takeaway for everybody here is because we’re not in the Bay area, we’re going to have to fight even harder to build a credibility network and you just need it.
You need to have people, you need to have investors and you need … I think the first 25 hires that we made at Podium were referrals from our investors and just people we knew. It’s incredibly important in that year you go from one to 10.
Now the next year in 2017, we went from just over $10 million of ARR to $30. It was a huge growth year from a revenue perspective for us and a huge growth year from an employee headcount perspective. But the big thing that happened in that year, this is 2017, is we expanded our vision. We started out like I said in the beginning, we started out solving a very specific problem for local businesses, which is a massive market.
Then we realized that we needed to get some fuel in the tank to actually go after that. And so 2017, we went out and raised a Series A and because we had product-market fit and because we had a credibility network, we were able to do that.
Now, how we raised the Series A is actually another pretty interesting story. In 2017, I got an email from an investor at Accel, his name was Ben Fletcher. He was a young analyst at Accel and emailed me and said, “We’re going to be in Utah two weeks, can I come by and see you?” Very similar to 2014. This time for whatever reason, I decided to respond and say, “Hey Ben, thank you so much. We’d be happy to meet if you have a partner with you.”
I wrote that out and I sent it back, and Ben never responded back. But the reason I said that and the reason we responded with that is that at this point in our business, we were at $10 million ARR, we are going to $30, we had a great company and we just felt like we deserved to get recognized by the partners because they’re the ones that ultimately make the decision. So we sent that email off, never heard back.
A couple of months later we went through the process of raising our Series A about 15 firms and Accel wasn’t part of that because they never responded after I sent that email. Then we were getting really close to getting some term sheets. I remember it was a Friday afternoon and all of a sudden I get a text message from an unknown number and it says, “Hey Eric, this is Ben Fletcher from Accel. I know you’re in a process, have you signed a term sheet yet? I have a partner that is incredibly excited about what you’re doing at Podium and I just want to know if you’ve signed a term sheet yet.”
I responded, “No, but we’re really close.” He said, “Okay, we’ll be there on Monday with several partners to dig in on Podium.” They showed up on Monday, we spent the whole day together and the rest is history. We raised this $32 million Series A several weeks later and Accel led it, and they’ve been fantastic partners ever since. But the lesson there is once you have a vision, and this again, this is I think a specific learning for companies outside of Silicon Valley. Once you have a vision and once you have the product-market fit, you only get out of your business what you expect of it so if you expect only to ever talk to analysts at these firms, guess what? That’s all you’ll talk to. But if you decide that your business is at a point where it deserves to get some face time from partners, it happens. So that was huge for us.
Again, 10 to 30 was a big financial year for us, and one where our vision went from here to here. Now the next year we went from 30 to 60, and that was another big year, not quite as big of a jump as 10 to 30 but in that year we basically pulled away from the pack. Now one thing I didn’t tell you about the one to 10 stage, is once we got to about a million dollars of ARR, we started to see all of these copycats pop up all over the place. So we are at first the only company that was doing this, and then all of a sudden there were dozens and dozens of companies doing the exact same thing as us.
And that just happens, when you build something that people want and other people see that it’s working, they’ll do it too. And during that one to 10, that 10 to 30 stage, I probably spent hundreds of hours obsessing over our competitors. Because we would release a feature and put it on our website and the next week like 10 other companies would release the exact same feature and put it on their website. And I was just like, “What is going on?” We got really obsessed with them and we spent way too much time worrying about them. And if I could go back to that year, the one thing I’d do differently is I would completely forget about our competitors and focus on our vision.
Because what happened in 2018, once we had fuel in the tank, we were able to just peel away from the competitors. And the reason was, what we found out in 2018 is we had a vision, we had this huge vision which was strategic and all of these copycats, their vision was literally copying what we did. Like that is the worst vision you could actually come up with and we actually had a validating story from a VC in the Bay Area. We were visiting this VC in Silicon Valley. They hadn’t invested yet, but we were talking with them and they said, “Hey, by the way, one of your copycat competitors pitched us last week, and do you want to hear what they said?” We’re like, “Yeah, we do.”
And this specific copycat was one of the most egregious copycats out there. We would come out with a feature, put it on our website, next week later they would come out with a feature, it would have the exact same name and sometimes it would just be a screenshot of our actual product and they would just Photoshop their name on it. I’m not even kidding you. This is like last year that happened. So we would get furious. What was cool is this VC told us that basically their entire pitch was a Podium commercial, because they didn’t have a vision. So they would talk about what they were doing and it was very obvious they were copying us and trying to copy somebody else, and their churn was through the roof. They were losing employees because there’s nothing to rally around. And the VC told us that they thought it would be really difficult for this already venture-backed company to raise any additional funding.
And so that was a huge validation for us, that we were doing things right. But it was also a really good lesson that I hope everybody here understands that your competitors don’t matter as much as you think. As long as you have product-market fit, a great network, fuel in the tank and a big vision, that’s what’s really going to fuel your business. So that was our path from 30 to 60. That was in 2018. I’m happy to say that things are not slowing down at Podium. We’re continuing to grow really aggressively. We have great product-market fit. We’ve launched multiple products over the last year and a half. And the conclusion of this whole talk, is that there literally is no conclusion to this. We’re just getting started.
Four years ago it was me and my co-founder Dennis in the spare bedroom of my apartment. Today we have 550 employees, $92 million of funding and we feel that from Lehi, Utah, which again, 10 years ago was farm land, we feel that we have an opportunity to build a world-changing company. And what’s cool about that, and I hope what you guys can get out of this is if you’re in Lehi, Utah, you may as well be in Bucharest, Romania when it comes to investors. It doesn’t matter. Once you’re outside of the Bay Area, you’re just outside and nothing really matters. So if we feel like we can build a world-changing tech company out of Lehi, Utah, if you’re from Paris, France or Bucharest, Romania or Turkey or Germany or wherever you are, the one thing I want you to know is if we feel like we can do it and we are doing it, you can too. Thank you so much.
Okay. Questions. So how did you validate… How much time do we have? Five. Probably zero, but five. Okay. How did you validate the idea to make sure that people want your product? That’s a really good question. So in the early days when I said we were driving around to businesses to sign them up, what we did before we even had a product is we basically figured out what it would be and then we would drive to those businesses and we would tell them that we were building this product. We’d tell them what it did and then we would get them to give us their credit card information. Because we basically we were… It’s like Kickstarter. We were like pre signing them up for Podium because we knew we’d build it if we got enough interest and if we didn’t we’d just return their…
We never charged their credit card before they had something, but that was the idea. So once we got about 10 businesses to sign up, then we invested our $750 each. We built the MVP and we launched it. The thing that really validated the idea is once we started talking to our customers who had been using it for a few months and they would tell us that they had actually sold more cars or they had gotten new patients because of the product we were building. That was when we really knew it was something. Because you can actually sell pretty much anything to anyone. That’s actually not the validation you need. You need to sell something to somebody but then you also need to actually see that it has value. And then the hard part is you don’t really know if they’re going to cancel until much later, but you can have these early signals like people telling you that they’re making more money, which is a good sign.
Next question is how do you acquire new skills or hone existing ones, mentors, training, et cetera? That’s a very good question. Like I said, we started this company with no prior software experience, and so Dennis and I have both felt like the last five years we’ve just been holding on for dear life, and the company’s just been pulling us along. It’s true. What we do to hone our skills is read a lot of books, but we don’t take all of that. We just take bits and pieces from the books we read. The biggest thing has just been having mentors, having other founders that you can talk to, ones that have done it before, ones who are doing it currently at the same stage. It’s just super important. And then most importantly, hiring great people around you because Dennis and I are pretty good guys, but our team is 10 times better than we are. And that’s really the reason that Podium’s grown so much.
What were your first three hires and why? So our first hire was a way better engineer than me. I have an engineering background, but I was kind of like the late bloomer in all my engineering courses. And so as soon as we had funding, we hired a great engineer who I had actually gone to school with. He was always the one who got 100% on the test and I was the one that was just barely passing, and so we hired him. He joined from Adobe, he was working at Adobe. He came over from Adobe when we were in the spare bedroom of my apartment.
So the first day that he came, we were so scared that he would come start on his first day and then realize that we were just two guys in a spare bedroom and then he would go back to Adobe. We basically ordered pizza trying to lure him in. We were like, “Hey dude, don’t worry about it. We’ve got tons of money. We’ll even order this pizza in for lunch.” And so we ordered pizza and then he stayed, luckily. He’s actually still with us today. Next hire was a salesperson, and the next hire after that was somebody to set appointments for the salesperson. So those were our first three hires. And I think it’s really important to hire an engineer first if you don’t already have engineering power, because if you don’t have a great product, you’re kind of screwed, even if you’re great at sales.
Biggest mistake? Our biggest mistake was probably not adapting to the size of our company fast enough. We started as two people in 2014, today we’re 550, and the things you need to do to make a great culture at 550 versus two are so different. And I think one of the mistakes we’ve made along the way is we didn’t adapt quick enough. And so we’d have these six-month periods where things were in flux and people weren’t super satisfied, and then we’d course-correct. But I feel like we could go back, we would make those changes earlier. And then you just don’t do it because it’s hard and you don’t really know what to do sometimes, but that’s what I would do. Anyway, thank you so much, everyone.