A Product Market Fit Show | Startup Podcast for Founders
00:11:26 · Pablo Srugo, Andrew Butt
[00:11:26] S1: Walk me through a little bit more of that Silicon Valley tour because there's people listening from all around the world and it's harder to find but when I went through – I went to 500 Startups accelerator. This was a while ago but, I guess, similar era. It was 2013, 2014. There's something different about the Valley. I don't know how much you remember of that trip but clearly it inspired you at least to some extent. What was it that happened during that trip? What did you feel that was different there versus in your startup ecosystem in the UK? [00:11:57] S0: I guess as a Brit I've always found Americans very upbeat and positive and can-do attitude and so that just struck me in general. I think the approach to building a software company is just totally different here to certainly how it used to be in the UK. I think the UK and other parts of the world are changing, by the way. They're catching up. I think in the UK the approach was, you've got to grow out of profits which always means growth is very slow because if you make $10, you can spend $9 on the products and then eventually you might make $20 and then you can spend 15 but it'll take 100 years to actually build a global company like that whereas the Valley, once there's real belief and conviction and proof points that this has got the potential to be massive, then there's a huge appetite to invest.
00:12:48 · Pablo Srugo, Andrew Butt
[00:12:48] S1: It's similar actually, just that difference between I guess the UK and Valley and Canada and the Valley. I remember back when we went – this is different era, so the numbers aren't the same as today but we were here in Canada raising a $2 million valuation or something like that and we got into 500 Startups and day one was Fundraising 101. What the speaker was telling us was all about just hyper-confidence. It was like, you've got to go home today, you've got to look yourself in the mirror and you've got believe that you're worth $7 million. That was just the attitude of, you've got to be hyper-aggressive which was so different to what we were used to in our ecosystem. You're right, things are, let's say, coming together a little bit more, converging a little bit more worldwide but still, there's just more willingness to just go for it, I think, in the Valley in general. [00:13:39] S0: Exactly. I think that was inspiring but I don't think – I never thought at that point that I would end up, for example, moving here and raising money in the Valley. That never occurred to me back in 2013 but it was just an inspiring visit that reminded my cofounder and I that we must get on and launch our own products. [00:13:55] S1: Just so I understand the scale of it because it's also really hard to give something up that's working, even if it's not exploding, how many employees did you have at that time, 2013, 14, 15? How much revenue were you bringing in on the services side?
00:13:55 · Pablo Srugo, Andrew Butt
[00:13:55] S1: Just so I understand the scale of it because it's also really hard to give something up that's working, even if it's not exploding, how many employees did you have at that time, 2013, 14, 15? How much revenue were you bringing in on the services side? [00:14:09] S0: I would say we probably had, say, $5 million of revenue or something and we probably had about say 40 or 50 people. That was the scale. [00:14:17] S1: Got it. Then you start working. Do you launch this with some customers while you're still doing the services business or just how do you manage that because it's just hard to do – I mean, it's hard to do anything and it's certainly hard to do two things that are very different at the same time.
00:14:17 · Pablo Srugo, Andrew Butt
[00:14:17] S1: Got it. Then you start working. Do you launch this with some customers while you're still doing the services business or just how do you manage that because it's just hard to do – I mean, it's hard to do anything and it's certainly hard to do two things that are very different at the same time. [00:14:34] S0: Yeah. No, very true. That certainly was true. That's why it took so long, really. Imagine we decided in 2013 we wanted to commit and build a real product, not just custom software for rebates. Then we did it on the side so of our 40 people, whatever it was, we had four or something on the side who were – and we were using the small profit we were making from the services customers to then put into this product development. That's why it took us a couple of years to really get to our first real launchable product and we were doing it all at the same time so that was hard. I think what came later, which we can talk about, is when we realized that this thing had huge potential, we did understand we'd have to shut down the services business because we just couldn't possibly do both. That was hard because we were then going from a somewhat profitable business to something which was immediately loss making and shutting off that revenue from services but it was the right thing to do. [00:15:35] S1: Let's go there. I want to go back after but let's just – let's go there because we're already on it. How far along did you get on the product in order to have the conviction to shut everything else down?
00:15:35 · Pablo Srugo, Andrew Butt
[00:15:35] S1: Let's go there. I want to go back after but let's just – let's go there because we're already on it. How far along did you get on the product in order to have the conviction to shut everything else down? [00:15:45] S0: We got to 20-something customers and 2.5 million of ARR or something on the product. That took us probably three or four years to do that. By, say, the end of 2019, beginning of 2020, that's where we'd got to. Then the real catalyst was the Series A because we would've just immediately gone out of business if we had shut down the thing that was generating cash when we had no capital, obviously, but we said, look, as soon as we close the Series A, then we'll start winding up the services and we'll literally write to our customers one by one and say, "Unfortunately, we're shutting this down but we're going to do it over a year and we'll help you to make sure you can go somewhere else." [00:16:25] S1: That's actually – that's a long time to be doing two things, 2016 to 2019 and you got pretty far along. I mean, 2.5 million ARR is pretty serious. Just looking back, would you have done it any faster or do you think that was the right way to do it?
00:16:25 · Pablo Srugo, Andrew Butt
[00:16:25] S1: That's actually – that's a long time to be doing two things, 2016 to 2019 and you got pretty far along. I mean, 2.5 million ARR is pretty serious. Just looking back, would you have done it any faster or do you think that was the right way to do it? [00:16:40] S0: I think I would've done it faster. I think, again, I didn't know what I didn't know, of course, and I think now that I've been in the Bay Area for four years and done the A, B, C, D and met lots of other CEOs and now – if I'd had any of that knowledge, I probably would've done it a couple of years earlier. Probably not more than that because we're, again, targeting quite traditional companies, manufacturers, distributors, retailers and they're only just really ready and embracing this type of product in the cloud. If we'd been too early, I think we would've not been able to get product market fit which I'm sure we'll be talking about. [00:17:18] S1: Yeah. Let me ask about that because I think when it – on the road to true product market fit, I think one of the earliest things is delivering value and just knowing whether there's even real demand. In your case it's so different because people were already paying you for that product just bespoke and all you were really doing was building it so that it would be a box that you could give to everyone the same box, let's say, in simple terms. How much work did you have to do to just understand if there was real demand or was that a given for you at that point?