A Product Market Fit Show | Startup Podcast for Founders
00:26:01 · Pablo Srugo, Andrew Butt
[00:26:01] S1: It's something to get inbound when you're selling consumer or SMB. It's another thing to get inbound that early on when you're selling enterprise sales , big contracts. Did you realize at the time how big of a signal that really was? [00:26:20] S0: No, again, we probably underestimated that. We were getting inbound for our services, of course, so we were familiar with getting inbound but when we saw some of the UK's biggest companies literally finding us on Google and asking us for a demo, that was – yeah, we did feel that that was quite exciting. [00:26:35] S1: This is all the good stuff. I think from the outside looking in sounds like things were pretty smooth, pretty easy. Do you remember some of the – I'm sure it wasn't the case – do you remember some of the struggles early on as you're getting those first customers, that first million or two in ARR? [00:26:52] S0: Oh, yeah. There were many of them. I think cashflow was extremely tight, extremely tight. I remember I would spend a lot of my time looking at the debtors' list and saying, "Which customers can I get money out of this week?" I remember I sent someone in the office to go and pick up a check from a customer because I literally couldn't make the payroll without that cash in the bank. The cash was very, very tight so that was one challenge. [00:27:18] S1: How common was that, that payroll was next week?
00:27:24 · Andrew Butt
[00:27:24] S0: I'd say we were never looking more than a couple of months out. It could be a couple of weeks out or it could be a couple of months out or maybe three on a really good period. We were running on an overdraft and the overdraft had covenants where we had to make certain amount of profits and that was tight and so it was just the whole thing was tight so that was one thing. I think the other thing, to your point, is trying to juggle lots of demanding bespoke customers, that kind of thing. They own you because they're saying, "We're paying you to work by the hour to build everything we want" with trying to, on the side, launch this product and this SaaS business, just balancing that I think was very challenging. Then we had plenty of technical challenges as well where, for example, one customer, who, again, remains a customer today – they were one of our first and they had a lot of users and a lot of data. They might have had, say, a million products that they wanted to load into our system and then they might have had, say, 200 users. We put everything in and then all these users logged on to then start setting up all their agreements and the whole system just crashed because with that combination of volume of products and the volume of users the whole thing – I remember on a Friday there's the top people yelling down the phone saying, "This has to be fixed by Monday because we've got all these people allocated to put this on and this is a disaster." My technical guides were saying, "This is going to take about six weeks to fix. We got to rewrite aspects, not the whole system but certain things have to be rewritten." That type of thing certainly came up. Those are some of the –
00:28:57 · Pablo Srugo
[00:28:57] S1: How did you resolve that one?
00:28:58 · Andrew Butt
[00:28:58] S0: Just real careful client management, really, so just, I think, over communicating. I literally got in my car and drove to their offices and walked around and showed interest and said, "This is very serious" and we had like daily conference calls and they were patients as well. They could have easily just pulled the plug and said, "Forget this. It's no good" but I think just trying to manage it day by day, really. What was exciting was seeing the common ground. There certainly were areas where we would get pushback and customers would say, "We're unique and we need it this way" and we'd try and convince them that the way we were doing it was better and explain why but what was starting to happen was in different locations, so, let's say, US and UK and different industries, so, say electrical and automotive parts and construction, we found that actually the way that they managed their rebates had a lot of similarities and a lot of the similar challenges. We were using the same product and the same code base to supply customers in those different industries. Then we found, for example, that those customers wanted to invite their trading partners to use Enable with them because if you've got – it's always at least a two-sided agreement so if you've got both sides looking at it together on the same webpage, then that's hugely helpful to make it effective. Manufacturers would then come in and say, "Actually we need this as well. We are actually struggling to manage it from our perspective." That was really encouraging when we could see common ground in different industries, different countries, different company types and made us realize this was a big problem.
00:30:40 · Pablo Srugo, Andrew Butt
[00:30:40] S1: Maybe what I'd like to end on actually is, you mentioned running on cashflow and maybe a little bit of debt and that being, obviously, really challenging. Then at some point you raise a very large Series A, I believe – you can correct me if I'm wrong, but I believe $17, $17 million. What was that process like of raising that round? Walk me through that and I'm curious also what it must have felt like having gone so long bootstrapping and then finding yourself with that much money in the bank. [00:31:10] S0: It was $17 million of Series A in total, you're right, but on day one, which was February, 2020, it was – I think it was 12. Then because the pandemic hit and we had other people that were interested, then we just extended it and it eventually got to 17 so that's just one point. I would say the Series A was the most difficult of all of the rounds. We were very fortunate that the B, C, and D were all preempted so really investors came to us and it was – whereas the Series A was really me, a couple of my team knocking on doors and, of course, no one had ever heard of Enable. We were this strange – and you can imagine the pattern recognition was not there because we were this UK company that had services and then we'd built this thing and it was all very odd. It wasn't what Silicon Valley expects or what they normally look for. I was virtually on a tourist visa in the Bay Area. [00:32:05] S1: Did you go down there? I'm actually curious, beginning to end, yes, the whole process, how you thought about it, how you set it up.
00:32:05 · Pablo Srugo, Andrew Butt
[00:32:05] S1: Did you go down there? I'm actually curious, beginning to end, yes, the whole process, how you thought about it, how you set it up. [00:32:10] S0: I guess one fun story is, I was a member of a CEO group in the UK called Vistage. That's still around today and it started in the US and it's like a peer group for CEOs. I was in that peer group and we'd meet every month and compare challenges and opportunities. I presented to this group in mid-2018 and I said, "Look, I'm at a crossroads because I've got this services business that's steadily growing and it's profitable. Then I've got this product which is a huge opportunity but it will lose money for years and it might fail but I can only do one. I need to focus." Everyone said, "You have to do the product" but one person in the room said, "If you want to do this seriously, you need to move to California." Then he said, "They know how to build software companies there." I thought back to that study tour and I thought, ah good point. I went home to my wife in June, 2018 and said, "How do you feel about moving to California?" and she was like, "Yeah, let's do it. [00:33:24] S1: You'd already made the move, by the way, or you were still thinking ?