Andrew: Hey everyone, my name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. And my goal is to do a set of interviews for real entrepreneurs. And I know that it’s working because so many of the people I interviewed today are people who’ve listened, built up their businesses and now they’re saying, “It’s my turn. I want to come back and do an interview.”
So the thing that you may not know is that I record these interviews with video on and the majority of people don’t watch the video. There’s not much to see here. You see my head, you see my guest’s head. What else do you need? So why do I do video? Well, a large reason is so that I get a sense of the guests when I’m asking a question I know, “Am I on the right track or did I just go over a line and now I need to soften things up?” In fact, today’s guest, Todd, before we started, I was sensing something was up. And so I immediately was able to address and say, “How’s your day?” And we talked about how he just traveled and was about to do more travel. That little bit of insight is super helpful.
The problem is, if you’re a web builder, if you’re somebody who’s a designer, if you’re someone who’s running a company that’s web based or app based, you can’t see that, you can’t see the look on someone’s face when they see a button that they don’t understand, or when they don’t scroll all the way down. Why didn’t they? You can’t get that data. And in the past, what you had to do was frankly, a lot of coding in order to get it done.
What today’s guest said is, this is not the way that the world should work. It should be easier. Companies should be able to create great products that users love without coding, without coding this analytics that will tell them why someone didn’t scroll or why someone did press this button and so on, and whether they did it at all.
His name is Todd Olson, his company is Pendo, and they’ve been at this now since 2014. They’re incorporated into many of the sites that you know. And I invited him here to talk about how he did it, where he came up with the idea, how he spread the word about it, how he got people to use it, and we’re going to find that out in this interview thanks to two great sponsors. The first is a company that we both know and love. It’s called Bench. It’ll do your books right. It’s called Bench. Check them out at bench.co/mixergy. And the second is a company that will help you hire your next great developers called Toptal. Check them out at toptal.com. I’ll tell you more about those later. But first, Todd, welcome.
Todd: Thanks, Andrew. Great to be here.
Andrew: You know what, Todd? I’ve got to tell you. So I went to your website earlier today and it was blank.
Todd: Blank?
Andrew: Blank. I wanted to see. Did you know that it was blank or not? Here’s why it was blank. uBlock Origin blocked it, because I’m guessing that they were blocking your code on some sites. Does that . . . What do you think of that? Is that an issue?
Todd: I think I read about this in Slack. I was on a plane this morning and I was looking . . . I was trying to catch up on things. So when we install into products, we capture what’s going on. So there are some ad blocking sites that have now listed us as a tracker. Most sites lists are tracking pixel which is the proper way to do it. But then someone this morning decided to just do our domain, pendo.io, which of course, blocks our website and essentially anything else that that Pendo would be providing. We’ve already reached out and a number of our developers caught this as well. So . . .
Andrew: I see.
Todd: Just a fun warning, right? So it’s only one day.
Andrew: And I guess actually that whatever it was might actually be resolved because now I’m on my computer and I have uBlock turned on and the site is loading up fine. So I don’t know if it was a setting that I adjusted or if it’s something that you guys did. But there is this issue right now where companies like yours are under attack because people are scared of tracking and now everybody is being lumped in together. Is that an issue that resonates?
Todd: It is and it kind of sucks, to be honest. I’ll tell you why it sucks because we genuinely care about the end user. So we sell to companies and those companies install all of us into products. And then we do collect behavior from their end users, and we legitimately want to make that experience better for the end user. So we actually measure our effectiveness based on the quality of the end user’s experience, not necessarily our customers. But our thesis is that if the end users are getting a better experience of the software, then the software companies will get better and make more money and be happier in general.
So people that block us are really hurting themselves because we’re not like an ad company that’s taking this data and selling it to anyone or trying to profit off the data. We’re actually just trying to make their lives better and help them get more value. So honestly, it hurts a little bit. I was on Slack this morning and talking about it because I genuinely care. And to get lumped in with a bunch of people that are trying to track you to sell you things and cross sell you things and do malicious things sucks because we’re probably the least malicious person you’ll meet when it comes to these things.
I honestly, just . . . If anything we’re trying to attack, it’s bad software experiences, not hurt the end user in anyway.
Andrew: And you’re someone who experienced the difficulty of improving that end user experience. You were a product, a VP product. What is your official title? VP of Product at Rally Software?
Todd: Correct, yeah. VP of Product.
Andrew: And at that point, you guys started to feel the need to improve based on data and you hit on a problem. Can you describe that?
Todd: Absolutely. So when you’re head of a product, you’re trying to steer a development team, what features they should build, what’s working, what’s not working, are the things that we’re building actually getting used. So there’s a lot of questions you have to ask. I mean, building something it takes teams of people and you ship it. If people don’t use that, it’s kind of a missed opportunity. You’re not really fulfilling the ROI of that development effort. So actually I hired a data scientists with the idea that this data scientist was going to answer all of my questions that I had. And it turns out that we often didn’t have the data, if the data scientist to Crunch to give us answers.
Andrew: Like what? Can you give me a specific example of something you were trying to do at the time?
Todd: Well, yeah. We were launching a new product, if successful would broaden a customer’s usage of us and potentially increase our overall revenue per user. So it’s a more advanced capability.
Andrew: And Rally Software helped companies. It helped manage agile software development.
Todd: Correct. So we’re coming out with a new product to do more advanced capabilities that was based on lots of user research, talked to tons of customers. We knew it was useful. We had been beta testing it for a while. We shipped something. And when we finally did get data back on it, we realized that people weren’t using it the way it was intended. They would maybe dabble it in or they would touch it once or twice, but they wouldn’t really actively use day in day out. There’s difference between looking at a feature and I call it snacking. You can snack on something, but if someone takes it away, you can live without it.
Andrew: Yeah.
Todd: But you can’t leave without food, right? So you can live without snacks but you can’t live without food, and so you find people snacking in areas of your product and that typically means something’s missing. It’s not must have. So just through some analysis, we started learning that things that we were shipping wasn’t delivering the intended benefit, and honestly, once you get that initial set of data, you know what happens? You just get thirsty for more. You’re just, “Okay, well, why?” Well, what type of customers? What types of users we’re using it? And are there any strong spots or any weak spots? So it creates this insatiable desire just to simply learn more because the goal is, everyone using it a lot.
Andrew: Yeah.
Todd: Usually. Or why the hell would have built the thing? So that’s kind of the initial impetus for the idea. And then what I found was, and every time I asked more questions, it lead to, “Oh, now engineering needs to do a bunch of work to help you answer that question.” And they’re like, “Whoa, I don’t want my engineers do all that work. That seems like it’s expensive.” So that’s kind of some of the challenges that I faced.
Andrew: And so you were going through all this and then at some point you said, “Okay, it’s time for me to move on.” Is this when CA, Computer Associates, CA bought the business or when did you move on?
Todd: Before that, after the IPO. So it was kind of post IPO. That’s a good milestone and it was exciting to get through, but it was time for a change for me. And I started thinking about what I wanted to do next.
Andrew: So you’re just saying to yourself, “I’m going to leave. I’m not sure what I’m going to do next, but I’m taking some space.”
Todd: Yeah, it’s complicated. Right? So there’s . . .
Andrew: Yeah. Tell me what was going on. What’s the complication? What was it that allowed you to say, “I’m out of here without knowing what the next place is?”
Todd: There’s always a time to leave everything, right? And I’m an entrepreneur, so actually Rally acquired my last company, or . . . Yeah, acquired my last company into it.
Andrew: 6th Sense Software, you started that?
Todd: Correct. I founded that company, they acquired it. The company was in Boulder, Colorado, and I was in Raleigh, North Carolina, and traveling back and forth. It takes a toll a lot on your family and a variety of other things. It was time for something different.
Andrew: I see. So you are four years under these circumstances, company had this IPO, you said, “For personal and professional reason, it’s time for me to move on. I’m going to start something new.” You didn’t know what you were going to start, and then you started to evaluate.
Todd: Exactly. I took some time off, spent a lot of times my kids, travelled a bit, spend time with friends that I hadn’t seen in years. And honestly, I started to re-immersing myself in the local community. I actually hadn’t spent time in the entrepreneur community in Raleigh-Durham. So I started meeting VCs, doing some consulting, spending some time with other folks. Just getting a sense of, what do you want to do next? I mean, will you do anything? If you include 6th Sense plus Rally, that’s an eight year run, about seven or eight year run. That’s a long time, right? If you look historically, I’ve generally spend five, six, seven years of pretty much all the places that I’ve worked. So I knew that whatever I did next, you’re signing up for 8, 10 years of your life, and you want to make sure you really feel good about that while doing it.
Andrew: And you started out just like Web 2.0 was getting going and you sold the company as that bust happened in 2008. So the world after that it changed dramatically. We were a whole other set of platforms, understanding of how people interact online. I see. And so you said, “All right, I want to understand it.” You started going out to different entrepreneurial events. Do you at some point feel like, “Man, I thought I was better than this. These guys are still at the hungry but stupid stage. I’m smarter than some of this. And what am I doing back here?” It’s okay to be open and say yes a little bit.
Todd: I mean, I wouldn’t say exactly like that. I spent a lot of time with a variety of folks, and what I felt was none of them felt like home. They didn’t feel like the kind of places that I wanted to build. And I eventually get to a point where it’s like, “Look, I’ve already started two things in my life. I’m capable of starting something. And if the people me don’t start something, there won’t be new companies because I’m capable, I’m experienced entrepreneur, I can raise capital.” I figured, why not take the experience that I built. I’m smarter than I was at each previous time, and let’s just try to do it right. And I think about it. The first startup . . . the last startup, excuse me, and the prior ones, there wasn’t a “Lean Startup” back then. The book hadn’t been printed. Actually, even the predecessors to the book hadn’t been printed yet. So I think we . . .
Andrew: Well, “The Four Steps to the Epiphany” wasn’t there? Is that what you mean?
Todd: Exactly.
Andrew: I see. So there’s a whole new understanding. It’s time for you to get out there. You, as I understand it started putting together a few pitch decks to just sort through your ideas, present it to friends, see what resonated with others and what you felt good at, right?
Todd: Exactly, exactly.
Andrew: And what was . . . I understand the one that you obviously went with, it’s Pendo, that’s why we’re here. But what’s one of the other ones that seemed right at the time, but you didn’t pursue? I want to understand your thinking as you were trying to evaluate your options.
Todd: Yeah, so two. Well, one was . . . And this is kind of . . . I think there’s only just a traction when you’re B2B guy because I’m B2B guy. In my whole career I have been B2B software. And boy, it would be cool to do B2C because he was like, “When you do B2C work it’s like, well, my mom will understand it.” Right? When I go to dinner party . . .
Andrew: Your high school friends will understand it. Yeah.
Todd: Yeah, yeah. That’s right.
Andrew: People are going to tell you in the street that they saw your stuff. Yeah. I’m with you.
Todd: It’s cool. And I like this despise paper, so I had some ideas around, can we do better scanning software. And the other day it’s still like . . . I still bring them tons of receipts or take pictures of them. It’s so painful and less organized than I’d like. And I have kids. So all the crap we get from school that we want to sift through and organized. So I had this idea on scanning then I kind of played around with and I built some prototypes around that. I also had one around budgeting software. I hadn’t used things like Adaptive Insights. And there’s a variety of SaaS businesses now that actually do this. I just didn’t know that. So we hosted on another one. So there’s two or three pretty much advanced budgeting. The budgeting is pain in the ass. I mean, you get . . .
Andrew: Budget for business, is?
Todd: Yeah. Like when you get all these spreadsheets and you want your own version of your spreadsheet just for your department, then use a roll up. And it’s complicated, basically, FPNA software. And I am not a CFO. That really wasn’t very quickly as I got into that market and looked at it. And while I had experienced budgeting pain, I realized that I was not the right person to start with that company. I would probably do worse . . .
Andrew: Because you’re not a CFO who can like live in all this crazy numbers and also simplify it. Is that right?
Todd: It’s because I have not actually lived the biggest pain that’s behind it and I’m not as much of a domain expert. I think the question you have to ask yourself when you’re starting a company is, “Why you? Why me?” And the “Why me?” for Pendo was really, really easy because I experienced this pain in first hand and lived it, and I think I had a unique point of view to commit to this problem where I felt pain, I understood the other one, I probably could have built it. I don’t think I was . . .
Andrew: What was it about the receipt that made you turn away from that? I’m curious about one.
Todd: Receipts.
Andrew: Or that scanning business.
Todd: It had a couple of things. One, you realize too there’s a reason that I’ve been doing business to business software my entire career. Someone put it . . . I forget who I heard from, but some former mentor that, all of VC money that either I’ve raised or has been raised around me is like a very expensive education. And so millions of dollars in my career has been put behind me to build things for B2B. And the reality is, why waste the education? If anyone’s going to start something, and if I want to hire, probably is . . . Look, the reality is most businesses fails, most startups fail. How do I increase my odds? I think doing something that I am more qualified to do is just going to increase by odds.
Andrew: I see. So it wasn’t so much, “Hey, the market is small, papers are going away,” or it’s more like, “I have this fantastic education and background that makes me a perfect fit for what eventually became Pendo.”
Todd: Yeah. And then we start pitching it to people and we pitched different ideas and people could just tell like, “Wow, what was the Pendo idea? That’s interesting. It seems like you really have a unique perspective. And what about this? What about that? It became very clear that there was something there. And as much as . . . [inaudible 00:16:12] up with. So I was almost pitching it last to really vet it hard. And people kept coming back to it. I was like, “Okay. I might as well just dive with two feet.”
Andrew: I think that makes sense. And obviously, you picked the right decision, but I’m looking here, I’ve got a stack of paper. I’m so embarrassed that I’ve got a guest here at the office and he’s looking at this stack of paper. And it’s all the tax papers that people have been sending me. Even in a digital in industry, when someone sends me a check during the year later on, it started the next year, they send me freaking paper. I can’t deal with it. And then all I do is I have a snap scan. I scan it and it’s a pain in the butt.
Todd: It doesn’t work that well. I mean, the reality is . . . I’m looking at OCR software, I’m playing around with it. Yeah, it’s an interesting problem. Maybe one day, long time.
Andrew: Hopefully, yeah. I actually think one of the reasons why you are right not to go in that direction is because I actually think that in the future people will just send this via digital somehow, right? If they’re using hello sign to have me sign paperwork for $100,000 deal, they could send the tax paperwork digitally too. Okay. The next thing that you did it seems like is find a co-founder. Why did you need a co-founder? Why didn’t you just say, “I’m going to go and hire . . . ” Or did you? Yeah, you did. You looked for a co-founder, a CTO. Why didn’t you just say, “I’m going to go and hire a CTO and raise money. This person shouldn’t have a co-founder status.”
Todd: To be clear, I have three co-founders. So one is a CTO, and he is the one I kind of did not know and the other two I worked with previously in my life and . . .
Andrew: So it’s four people together?
Todd: Four total founders, that’s right.
Andrew: I didn’t realize that. Okay.
Todd: Yeah. And one, I think when you’re starting something, it’s lonely out there, and having someone like . . . Look, I’m working out of my house, I’m getting up every day. It’s hard. To keep yourself motivated is probably the hardest. You have no set schedule, there’s nothing really to do per se. You don’t have customers yet, you don’t have even investors yet. You’re trying to get it going, trying to create conversations. So the more people you have helping you, I think the better.
In my case, I think the CTO is a particularly special role and has been instrumental and kind of success because in prior startups I was the CTO. So I have a technical background, I can code. So one of the ideas certainly was that I could do that in this space. But it was kind of hard to be a CEO and CTO of something. You’re going to be bad at one of them. And honestly, I think meeting Erik who ultimately now is our is one of CTO and co-founder has freed me up to focus on the product, it freed me up to focus on product market fit, freed me up to focus on telling a bigger story, which given I live this pain, I was uniquely suited to tell that story. And I wasn’t worried about coding and operational things and getting the product built, I know we wouldn’t be here. So I think it was absolutely critical that actually keep me awake.
I had to find someone good enough qualified enough like me enough in enough ways that I felt complete confidence just giving up control over something. And that’s really, really key for founders, and this is a challenge as founder scale. You’ll hear this from other ones. Giving up control is a very hard thing for most founders. And I have been blessed with the fact that I can give up control of a variety of business. And the technology area was a first area I really fully gave up control. And that doesn’t mean we agree on everything, it doesn’t mean we don’t argue and battle. It doesn’t mean any of those things. It just means that I really do trust him and it’s freed me up to, I think, do things I’m actually better at. So yeah, I think that was really, really key.
Andrew: Okay. And I’m looking at his background and I see that he was CTO of rPath for six years. I’ve been looking up as we’re talking the other co-founders. All right, I get it. You know what I appreciate about what you said is that, I’ve heard people say it’s lonely, but I’ve never heard them describe it the way that you did in the sense that there’s stuff I need to do, and it’s hard to get myself motivated. I find that a lot of, so I’m going to include myself in, if I’m not getting something done, I’m not getting motivated, I find it’s my fault instead of saying, “It’s the fact that I don’t have the people around me to help me that not just holding me back, but I would do better if I had the right people around me instead of blaming myself and think about what else and who else I could bring in.”
Todd: Yeah, I think there’s a tradeoff. I started a company with four founders. There’s plenty of blog posts about it. And the reality is that decision, a lot of funders won’t make because it’s expensive. It’s expensive in terms of equity and I just put it out there. It is.
Andrew: I’m going to say you guys didn’t let split equity evenly, though, because there’s different roles and different responsibilities.
Todd: Yeah, yeah. But close.
Andrew: Oh really? Okay.
Todd: Closer than probably some people think or would think. But I’ve always been the mindset that me as an entrepreneur, my goal is to build the biggest possible pie.
Andrew: I see.
Todd: Like focusing on my slice, it’s very narrow minded thinking. I would rather focus on the biggest possible pie as possible. That’s still the goal. The goal is create a huge pie. Otherwise, why raise money? Like, you’re not going to raise money if you . . . Some people heard their chunk of the pie. Like, no, no, no. So many entrepreneurs, “I give up this,” or give that. But what can you create with it? Yeah, you can have a philosophy about giving up or a philosophy about “What can I do? How can it be better by giving up something?”
Andrew: All right. You know what? Let’s rave for a moment about a company we both love and then come back and find out how big you made Pendo. We’ve got the revenue in front of me, but I’m going to let you say it. And then how you got your first customers and how you build up.
But first, the company that we both know really well is a company called Bench. Before we both talk about why we like them, I want to tell you why the opposite is more painful than it should be. My wife and I, we just spend money whenever we need to on household expenses because who cares? And then I thought, I want to be aware of it, just like I have my monthly company numbers and I review them, I want the same thing. So I said, I’ll go for someone inexpensive and I’ll use QuickBooks because that’s what they recommend. So I signed up for QuickBooks . . . I shouldn’t have said it. I shouldn’t rag on the competition, but it wasn’t . . . And QuickBooks, that wasn’t a huge problem.
Here is a big problem. I hired someone who was a good bookkeeper. She was doing okay. And then she had an issue with her family. And so how do you not say, “Okay, go take care of your issue with the family.” So we missed a meeting and for two weeks the numbers weren’t done. And then she had another issue where her daughter was bringing her granddaughter into the house and she was taking care of that and go, “All right. Of course, you have to do that.” And then it became two months of my numbers not being updated because this great bookkeeper couldn’t keep up with it because of what was going on her life.
I’ve said over and over, if you’re a business and you hire a bookkeeper, I think you’re making a mistake. You’re making a mistake because now your life is in one person’s hands. They get sick, they need a vacation. Who knows what happens? You either have to force them to work which you’re not doing because you’re not a slave owner, or you say, “I’m now in trouble.”
That’s what I love about Bench. Bench says, “We don’t just give you software that’s modern, that’s integrated with the other services you have like Stripe, like all the other online tools that you have, they understand and they suck data from it,” but they also say, “We have a team of people who can be here to support you. That’s one of the benefits of it.
And one of the past guests, all the time when I do interview is my guest listen to the ads and then they go check it out. Dmitry Dragalove [SP], I interviewed him, he said, “All right. I’m going to sign up for Bench. Let’s see what happens. Because I couldn’t believe it.” Tons of phone calls. He says, “There’s their number on the site. I get to talk to them. I couldn’t believe I talked to a UNB within minutes, and they’re constantly bringing more people in to help me whenever I need it.” Fantastic. What do you know about Bench, bench.co?
Todd: I know the people. And the founder of Bench, and we were . . . I know their investors, we share a seed investor and just creative people. And they’ve done really well, very customer focused team and individuals. And they’ve got a very successful company. So how cool is that?
Andrew: A really successful company. You’re talking about Ian Crosby. Right?
Todd: Correct.
Andrew: Yeah, I got to meet him in a Mixergy interview. A really smart guy. And I think it’s important that because he loves the product so much, because he’s so on it, that is why the product is so good. If you’re out there and you’re listening and you want someone to take great care of your books, I urge you actually to do this. Don’t look for someone, look for software plus a team of someones who can do it, and that’s what Bench is about.
One last thing. One of my past guest said, “I’m not using Bench, I have this accountant who does it.” I met the accountant on a cruise, like this evening cruise dinner. I said, “Hey, someone mentioned how great you were doing books.” He said to me, “Actually, we use Bench.” I go, “Bench is the accounting company.” So he even outsources the work to Bench.
All right. If you guys are out there, you owe it to yourself to go check out Bench, and don’t go to their URL to bench.co, instead go to this special URL that I’m about to give you because they’re going to give you a discount and a free trial. Free trial means, you can try them right away. They’re going to start integrating your numbers, start showing you how good your books can look and how organized they could be. And then if you want, you can continue with them at 20% off for your first six months. Go to a bench.co/mixergy, bench.co/mixergy.
All right, Todd. That went a little bit long because I really do like Bench. I want them to keep coming back as a sponsor because it’s so good.
Todd: That’s a great advertisement. Wow. I was impressed.
Andrew: You know what? The problem is that even in business, you can’t love too much. Just like when I was dating, if there was someone I was really into, I would crowd her and it becomes a little too much. I have to be aware the same thing with guests and advertiser. I can be so loving that I’m crowding Bench and it makes the audience feel like I’ve got this passion for Bench instead of for the audience. And also the ad is going forever. All right. Forget about me and my ad read. Let’s go to you. Revenue, 2017. Where was it? Where was Pendo?
Todd: I mean, we don’t disclose revenue. We’re a private company.
Andrew: I have it in front of me. Can you give us . . .
Todd: You do?
Andrew: I won’t read it because you told us in private. But can you give us a sense of scale?
Todd: Yeah. I said middle teens AR.
Andrew: Middle teens million.
Todd: Yeah, million. Of course, yeah.
Andrew: Annual recurring revenue.
Todd: They are.
Andrew: The numbers are really impressive here for a company that was started when?
Todd: We raised first capital . . . Basically, January 1st, 2014 is when we started.
Andrew: 2014. All right. Let’s talk about getting customers. So now you have this idea, you started to build this . . . Actually, CTO starts to build this product and you have to go after customers. Amy was one of the first customers. How did you get Amy and how did you get the early people in?
Todd: Yeah. So she was part of a company where we had connections with their head of products, and I think it was an early seed investor made the intro and we talked to him. He’s like, “Yeah, sure. I’ll try it out.” He brought the feedback. And as we got installed and he kind of delegated Amy to take a look at the product. And for a while, I think the she was our only user. Every day we’d . . . Every week we’d look at it. What’s she doing this week? What’s she doing that week? We did have . . . We would continually onboard customers but it was clear that she was really getting value out of it just based on her usage.
So I think the cool thing is for a while, we really iterated based on her and other early users feedback. So we would see something that they’re doing or not doing, we’d call them and ask them. And in the early days . . . And I’d mentioned “Four Steps to the Epiphany” and when we start up. You could argue that this is kind of our early evangelists that they were . . . We weren’t asking necessarily money from them out of the gate. We were asking them for feedback. And we had bi-weekly calls, what worked, what didn’t work, and . . .
Andrew: With your customers?
Todd: With customers. That’s what we asked. If it’s cash commitment, we asked for a time commitment. And that time commitment was to get feedback. And at least things were fair to ask. And based on them giving us feedback, the give back to them was, we’re going to take that feedback and integrate on it and develop the features. So we were incredibly customer-driven early on, and actually we’re still are. So for a company of our size, we will be very aggressive when a customer comes in and it’s their right feature requests, we sometimes move in a dime. So even now. But anyway, we went on for months and finally after 10 months or even six months, I guess, it was 10 months from the date of starting, but six months from first shipping date, we closed our first paying customer.
Andrew: And one of the things that you would do with her is you would look at what she was doing. And I’ve got this note here where Amy, for some reason, had 50 columns in her reports. Do you remember why?
Todd: Yeah. This is an interesting thing for any products person. And I always say that we’re looking for outliers. We’re looking for surprises and data. Like just seeing average usage, it’s useful, but not necessarily actionable. She had 50 columns in some report, and the product was not built for 50 columns. So it was behavior we were not only intending to but felt wrong. It’s like, “Okay, this seem something’s broken here. She doesn’t know how to use the product or what’s going on?” So we called, and I think that call was really illuminating because I recall learning what she was trying to do with the product and it was a use case we hadn’t conceived of yet. And she was kind of like twisting our product to solve some problem. And the reality is like, “Oh shit. We should just go fix that problem.” Right? “Why don’t we just build her a different screen, a bit different UI to actually purposefully solve that use case?” And we did that.
And that was one of the examples that I think really helped us achieve product market fit is discovering areas of almost misused of the product, and then creating a new way to solve a similar problem. So that was . . .
Andrew: What did the first version do? The first version was a little bit of code, people put on their site and it was web based only, right? Not app based at first?
Todd: Yeah, yeah.
Andrew: So they put it on their site and then . . .
Todd: Capture all of the behavior and allow them to do some in-app messaging basically with the first version.
Andrew: And allows them to do messaging?
Todd: Also do in-app messaging, yeah.
Andrew: Was it app or web at first?
Todd: Web based.
Andrew: Web based. Got it.
Todd: So when I say app I meant web based. But we do have mobile capabilities, that’s very recent.
Andrew: Okay. And so you would be able to say, “Look, there’s somebody who just keeps going to this, keep going to this, and you’re showing them what the most used areas are or here are the parts that people are not using.” Was that basically the report?
Todd: Both, yeah. We could tell if you were not using, if you were using, and then the messaging piece was actually helping educating the end users of why they should be using something. So you discover . . .
Andrew: You told our producer about Amy. I did my own little bit of research to see who is Amy. It turns out there are a few people online whose name is Amy Pendo, but I think I found the right Amy. She works at Invoca. Am I right?
Todd: Correct.
Andrew: Okay. So Amy works at Invoca. I’ve got a little bit of information from your site because you guys did a little bit of a case study on the company. And here’s one example. Amy noticed that the search bar that they have at the top of their site wasn’t being used, but they needed people to use it because obviously search is an easy way to get the features that people were looking for. Your software helped her understand that the search bar was not being used. As a result, she created a tool tip to say, “Hey, there’s a new search bar,” and draw people’s attention to it and that got more usage. And then she took that tool tip and every time she has a new feature she is thinking about, “Can I add a tool tip to it to just call existing users attention to something that they might not notice because they’ve got muscle memory?” Am I right?
Todd: Exactly.
Andrew: So the thing that I’m wondering is, lots of different software can say, “People aren’t using this feature.” How do you guys communicate that differently from, say, the search vendor, if it might be Swiftype for search? Swiftype will say, “Here’s how many people saw it, here’s how many people used the search.” And then how did you also make the leap from people aren’t using this feature to here’s a suggestion for how to get more people to use it?
Todd: You’re asking me why other people don’t do what we do.
Andrew: No, no, I’m not. Let’s take it both ways. Let’s start . . . Let me break that question down. How are you different at identifying what people aren’t using than the tools that existed at the time? What was it that you were doing differently? Because there were ways to hunt down the people who aren’t using search.
Todd: I think a couple of things were really unique. One is, most of the prior technologies before us required developers to do some level of instrumentation, say, wrap something on the search bar, capture it back.
Andrew: Got it.
Todd: Maybe a vendor like Swiftype would provide it but most people aren’t using things like that in their products at least. They could be using it maybe on their website or things like that, but so not in the product itself. Second thing is, we really allowed you to contextualize it, not just to . . . Most people have the notion of a, “Five users did this.” We can tell you the exact user and whether they’re part of a customer and what customer size and segment. So I think one of our core early innovations was actually just focus, and I was focused on the B2B market. So prior to us there haven’t been analytics firms that are really focused on B2B software. Most of them came from websites, marketing, conversion funnels.
Andrew: Got it, yes.
Todd: And honestly, I was getting to just building something for myself because it’s the problem that I had faced. And if you had told me at Rally that 10 people were doing something, the first thing I was like, “The 10 people are my biggest customer or not?” Like, I care about [inaudible 00:33:59] customer.
Andrew: Right. And that’s the other thing that the case study says. She can identify who her important clients are and users are. Before migrating she could talk to them because you help her identify them and then she can get feedback from them before improving. All right. So let’s take the second part of the question that I hit you with before. All right, so she knows or your client knows that some aspect isn’t being used. The leap from this is not being used to here’s the solution to get them to use it, is a pretty big one. How do you help them go from problem to solution, problem to suggestion?
Todd: That was part of the original vision for Pendo as well. The company . . . My last company, 6th Sense Analytics, was an analytics company, and one of the reasons we sold the company amongst other reasons was that it’s kind of hard to have a so what. Okay, so I get this data and you tell me all these information. What do I do with the data? What actions do I take?
Andrew: If anything you make me feel bad by giving me this data that people aren’t using something. Right.
Todd: Exactly. So I always wanted to have a so what inside of anything that we’re doing analytics wise. One thing to tell people that they’re bad, but you got to give someone a solution. We incorporated this notion of messaging because most often when someone’s not using something, it’s usually awareness. Time and time again, if you’re not using something in a product, you probably don’t know why you should be using it. The reality is today in 2018, none of us read help, we’re not reading a release notes. We’re not like paying attention to the software we’re using. We just go in and trying to use it.
So we provide people like Amy and other companies with the ability to educate people on why they should be using it. So you’re not using search and we know you’re not using search, we can show you a message to say, be using search. And what’s powerful about Pendo is that we can personalize the experience. So Andrew, if you don’t use search, you’ll see the message, but if I use search, I will not use the message. So that . . .
Andrew: I see. So the messaging was part of the software that you created. It’s not like she had to figure out who on my team can create these tool tips. You did it. I see.
Todd: We empower Amy with not only giving her insights, but the ability to take action on those insights all within Pendo.
Andrew: Got. In addition to, if all these different things like drawing attention to the tool bar doesn’t help, telling her, “Here are the five heavy hitters who are not using this, you might want to contact them and understand.” And maybe there’s more. Got it. Maybe there’s a different reason that no online tool is going to tell you, like they don’t want to search, they just want to be given something or something like that.
Todd: Yeah, exactly.
Andrew: Okay. All right. This tells me a lot. All right. So now you’re going after clients who are related to you or your investors or your business in some way. That’s the beginning. You told our producer, “My goal at the time was to double revenue every single quarter. I wanted to get big.” I’m curious about how you got big. I have one story that I’d like to tee up for you and then hear beyond that. It was a story about the guy from Salt Lake City, who . . . Do you remember who I’m talking about?
Todd: Oh yeah, exactly. This is a . . . So you have my background and have gone over by bio. I have never sold in my life. I mean, in some level, it’s a bit frightening. Right? You’re going into something . . . I remember an angel investor asking me, “Have you ever sold anything?” And I said, “Well, I’ve been on sales call.” But he’s like, “No, no. Have you ever actually sold?” The truth was no. And so this was my first time to prove to, I think, myself and everyone else that I could sell something. So we started off and the first quarter we started selling, we closed Amy in and other several customers, and yeah, the goal was doubling.
And that first quarter that I tried to double we were working a bunch of deals, I felt very comfortable, plenty of pipeline, but it’s getting closer and closer. I’m looking at my watch and this one deal I kind of promised wasn’t coming in. I hadn’t experienced this before, but it was getting very frustrating. That’s a one thing I have a lot more empathy for sales now, I mean, getting other people to do things on your behalf is a lot harder than say, programming and computer in many ways because the computer does what you tell it to do. Customers, not always.
So what happened was I realized the person with whom I was speaking didn’t actually have power to sign a deal. And I was like, “Oh, I didn’t see that one coming.” I’d asked, I assumed based on his title that we were good to go. And so I tell him, “Hey, look, I’m planning on being in Salt Lake on Thursday . . . No. Tomorrow. Can your boss meet?” And we traded back and forth, so let me check. Next morning I come to work and he finally tells me, “I don’t know. 10:00 a.m. my local time. Yes, he can meet tomorrow.”
Great. Of course, I go home, book a ticket, pack my bag, get in at midnight. I was wiped. And went in there and I said, “Look, you guys have been evaluating. I think everyone likes it. I’m looking for a commitment and what will take.” And he’s like, “We don’t have any capacity to implement this thing. Can you have an engineer here soon?” I was like, “How soon?” “Next week soon.” I was like, “Sure, we’ve got plenty of bench. Of course, you’re like a 5% company, so he’s [inaudible 00:39:19] the time.” But at the end of the day, I just figure out and took engineer and send him out and said, “What else am I going to do?” Right? So that’s what happened. I said, “Fine. If I have someone here next week and I put that in the contract, will you sign today?” “Yes.”
So I get in to an Uber, get in the back sit, tether it to my phone, work up the contract, adjust the language according to our verbal agreement, send it over and get signed while I’m in the airport. Largest deal at that point to date. Got us to our number. I also told an engineer, “Hey, I need you on Sunday night.” It was on Friday. “I need you to hop on a plane and spend a week at this customer.” And the rest is kind of history.
And that was one of first big customers. They’re still our customer today. They’ve gone through multiple renewal cycles. I think it’s just a tenacity. The funny thing about that, these people, they weren’t like a relationship with a VC. I actually cold walked up to their booth at a trade show, asked for their head of products name, I got a name, just continually hit him up, called him, emailed him, and it kind of led to that. So it was just pure tenacity, and just honestly the product works. At the end of the day, it solved the use case he was looking for. So it wasn’t . . . It was a lot of work, but it wasn’t magic. That was an awesome quarter.
Andrew: And that was a big part of what you were doing at the time. It was one on one closing sales. What I want to talk about when we get back from a quick sponsor message is the next evolution of the sales process. How do you go from you being at Dreamforce or some event finding someone, following up, being tenacious and closing the sale to the company having a process that gets you to close sales? Cool?
Todd: Perfect.
Andrew: All right. I’m going to talk to you now and everyone who’s listening to me about a company called Toptal. Here is the deal about Toptal. Everyone who’s in San Francisco is here for one of two reasons. They’re either here because they want to raise money. Are you here in San Francisco?
Todd: I am sitting in San Francisco right now. That’s correct.
Andrew: Yeah, it’s funny. We’re probably like a block away, but we’re still doing this via Skype.
Todd: And one of the big draws to being here is, yeah, you raise money, but the other one is the level of engineering talent when you’re starting out, especially, is unmatched here. The guy we came to pick up my treadmill. I had a standup treadmill in here. He picked it up. He was working for Tesla on autonomous vehicle technology. So really, there’s a level of engineers. This is what brings companies to San Francisco. What you need to know, though, if you’re listening to sound of my voice is, you don’t have to be here in order to get the top level of engineers, because it turns out, there are a lot of smart engineers who can outthink the rest of the developer world who just don’t want to live in San Francisco. They want to live in whatever, not just city they’re in, but whatever country they’re in.
And what Toptal says is, we have a unique ability. We’re really good at drawing the best engineers at challenging them with tests and then having them in our network so that when someone needs to hire a developer, they can come to us and we’ll match them with the best engineer for their needs. And so that’s what Toptal is. If you’re out there and you’re looking to hire one developer for a part time basis or a project basis, or even a team of developers, all you have to do is go to toptal.com/mixergy. When you go there, you will see that they have an offer that they make for us that they don’t make for everyone else.
But you’ll also see that once you hit the . . . it says, “Start your trial now” you don’t just immediately get a developer. What you get is scheduled with a person at Toptal who you get to talk to about your issues, what you need, and then they will help you by connecting you with the right person. And if you want, you can get started often within a few days. If you’re not happy, you don’t have to do anything and they won’t charge you a thing.
So go to toptal.com/mixergy. That’s where you’re going to get 80 hours of Toptal developer credit when you pay for your first 80 hours, in addition to a no risk trial period about for two weeks. I always talk too fast. I should say top as in top of your head, tal as in talent. So it’s toptal.com/mixergy. Toptal.com/mixergy to get world class developers wherever you are. All right. I know we’re a little over time, so if you need to let people know that we’re going a little longer, go for it.
Todd: Yeah, someone’s forming outside my conference room, so I just want to make sure. But you can go right ahead.
Andrew: You have a few more minutes in here?
Todd: Yeah. Let’s just keep going and hopefully . . .
Andrew: Until you’re booted.
Todd: Until I’m booted.
Andrew: All right. So what is the next evolution of the sales process? You go from friends of friends and contacts of contacts to you going out and getting . . . And then how do you develop a mature sales process?
Todd: For us, you get something replicable, and I did it for several quarters doubling and I felt I got to a point where I had to play book myself, and it’s about hiring someone and teaching that playbook, and shadowing them and making sure that you’re continuing to partner with them as they learn to pitch themselves.
Andrew: What was your playbook that you passed on when you were just getting started, and obviously it evolved, but what was it back then if you could describe it?
Todd: It was a demo, a little not much for presentation. A playbook it’s not something that’s necessarily written down, and I think demo is a big part of understanding objection handling. And people always ask, “Well, isn’t it like this?” or, “Isn’t like that?” or, “I have this.” Those are the things that you have to really codify the answers for, write down, handle all sorts of competition and help fix. So that’s essentially what I worked on and I got it pretty tight, and then I hired a VP of sales who’s actually still our head of sales. And I just spent time teaching him that.
And it wasn’t just teaching someone that, it’s also when they jump on calls and they get stuck, parachuting in some time. So I actually, I had . . . We have open floors plans like all the startups do. My desk would be near here and someone could Slack me in the middle of demos. “Hey, Todd. Can you jump on and help me out with this customer.” And I do that for a long time. Probably, the first year after we started hiring a sales team, just helping.
Andrew: You just jump on with them.
Todd: Jump on, yeah. “Hey Mr. Customer, how can I help you? What questions do you have?” They just hear me answering questions over and over again, and then they get start getting good at it, and eventually stop happen to jump on as many calls. But it’s just making yourself available.
Andrew: I looked at . . . I’m actually looking at it right now. The first version of pendo.io. Your site was clear from the beginning. I could see why someone would sign up. It says, “Increase feature usage, improve usability and reduced churn.” Really clear. I can see that the call to action is, “Enter your contact information and get a demo.” I’m wondering if their process was demo, someone asked to do a demo, then you do the demo, you handle objections and you close the sale, ideally. How do you get people to come to this site? How do you get people to ask for demos? What was it back then and where is it today as a process?
Todd: I think a lot of the early marketing efforts, of course, we’ve spent money on PPC and a variety of traditional Google AdWords, things like that. But I think a lot of our stuff came from events, face to face. So we invested a lot in . . . There’s unconferences called ProductCamps that are weekend events and we used to go to pretty much . . . We still got to all of them. But I used to have to go . . . I mean, we’re only couple of handful of people. And I go there if I get one, we . . . My wife and I worked a table all day long in Austin, Texas, and we were there from 8:00 in the morning to 5:00 when we were white. And I was supposed to be like . . . Well, on the Sunday we took off.
Andrew: And it’s the two of you sitting side by side or . . . I’m assuming at some points you relieve each other and you let yourself get some safe. But the whole day, one of you or both of you is there. Anyone who’s curious about the product you talked to, you show them and you explain to them, and then you schedule a follow up demo.
Todd: Exactly. We just collect the email addresses literally on a notebook or . . .
Andrew: That was the biggest most successful way for you to get people in your pipeline?
Todd: It was, it was. At the end of the day if you’re doing B2B, you don’t . . . Yes, you need to speak with a lot of people and you need to have a funnel, but any one customer can . . . The numbers were small back then and we had to hit. We’re all bigger now. So yeah, that was a very viable way of getting our word out there.
Andrew: Because the product cost . . . It’s an expensive product, few customers are signing up so you could spend more time getting to talk to them. Am I right?
Todd: Yeah. I mean, we’re B2B product. And our price, I don’t think it’s expensive per se. I think it’s an amazing value.
Andrew: I shouldn’t say expensive. It’s not like a SaaS for . . . One of the people on your site with Spring Metrics. When spring metrics . . . This is an early version of your site. Peter Bourne, the CEO, gave you guys a testimonial on the site. Spring Metrics, I remember I was a customer there. There was like $50 a month and they didn’t have the ability to have this kind of high touch experience. I think Peter, if I’m thinking in the right company, Peter then was brought on because he was going to increase the prices so that they could do this level of high touch interaction with people.
Todd: We know Spring Metrics really well. One of their founders joined Pendo as our head of product early on, and they were . . . Fun fact, they were our demo sites for the first three years of our business, Spring Metrics.
Andrew: So you would keep demoing, here’s how . . . Oh wow. Which founder?
Todd: Shannon Bauman, their VP product.
Andrew: Every time you talk, all I do is I go back in and I look at it. It’s so interesting how, as I’m clicking through on LinkedIn, at the company or some company that you worked with to see how many other people are connected. It’s like six degrees of separation. Like let me give you an example. Jake Sorofman, he’s the CMO?
Todd: Yeah.
Andrew: He shares a past company with you where he worked at 6th Sense, if I remember, right?
Todd: Yeah.
Andrew: But also with your CTO, the co-founder at rPath where he was Chief Marketing Officer. There’s a lot of that going on. Right?
Todd: So he introduced the two of us. And the funny thing is, I have been driving in Boulder, Colorado all the time. I was hardly in Raleigh. So he said, “You got to meet Erik, you got to meet Erik.” [inaudible 00:49:25] whatever. It was until I left and actually had time on my hands and I had no excuse to say no to him. I’m like, “Sure. I guess I’ll have lunch with Erik.” And then sure enough now we’ve been working together for the last four and half years. The irony is, I kind of wish I’d met him earlier, but I guess the timing was just perfect when we ended up connecting.
Andrew: All right. So far we talked the highs. Let’s close it out with one low, which was, holiday season before you closed your series A, you guys were having trouble, like there wasn’t a lot of cash in the bank and you were trying to raise money. I’ve heard about the issues with raising money in Raleigh, I’ve heard of issues about raising money in different parts of the world. Talk about the issue that you had when you were trying to raise money. Do you remember what happened? I’ve got . . .
Todd: Yeah.
Andrew: I’ve got notes.
Todd: I mean, that . . . We doing . . .
Andrew: Day after Christmas you talked to someone?
Todd: Yeah. We were doing well, we had revenue, but the bar for series A at that point was about a million dollars in AR and we’re definitely not a million dollars in AR. And we were growing well, and we were doing well, and I felt very confident at business, but we were not a million dollars. So anyway, we needed money. So I was doing a lot of fundraising and I met a VC and he’s like, “Look, I’ll be in New York . . . ” He’s a Bay Area VC, but he said, “Look, I don’t care about geography. I spend most of time in East Cost. My girlfriend lives in New York, blah, blah, blah.” So I’m talking to him and he was there for Christmas. He’s like, “I’ll meet you the day after Christmas.”
So my wife’s family is in Jersey, we’re in Princeton. Day after Christmas, I wasn’t feeling that well. I was coming down with a sinus infection, but whatever I got on New Jersey transit, hour-ish ride to Penn Station, very cold, going into a diner. We spent two or three hours in that diner going over every aspect of the business, really connecting. I felt great, honestly. I was like, I got back on the train, went right back to the house, passed out, fell asleep in the train. I was like exhausted but I was like, “Wow, great use of my time, felt really good about it.”
And then days would elapse, weeks would elapse. Like he wasn’t really responsive and kept introducing new hoops and new conversations and became clearly that this just wasn’t going to happen. And it was tough because I felt really good about it. I felt like it was the right fit for us at the time. And now around the same time, our existing seed investors came back and did an inside round. And as an entrepreneur, it was definitely the right call and I really appreciate the support of our investors. It made it very easy on me, and it really helped. It allowed me to focus on growing the business.
But I remember you feel dejected. It’s like one of those things where you give up part of your holiday, you connect with someone, you feel like on a personal level, you feel like it’s a good fit, the right fit. And my gut was wrong, I guess. I guess I did not nail it as much as I thought I had. So that’s tough. Those are scenarios that you remember. We did end up doing our series A in October of that year with Battery and honestly, things worked out very well for us because if we had taken that round, we probably wouldn’t have been able to get Battery. So one of these things that everything worked out really well in the end, but I know when you’re in it, you don’t see that. Right?
Andrew: Yeah.
Todd: You don’t see the end. It’s just an option that’s drawing up in front of you. And those were definitely rougher days.
Andrew: Yeah, I see. Contour Ventures and Core Capital both came in the seed round, million dollar sit round, then the $11 million A round they both came back in with Salesforce, IDEA Fund from Durham, I think, and then Battery. And then every one of them, it seems like came back for series B.
Todd: And C.
Andrew: Oh, I didn’t know there was a C.
Todd: There was a C. And it’s true that all came back for all of them. So yeah.
Andrew: Wow. All right. Anyone who wants to go check it out, should actually go see pendo.io, pendo.io. Frankly, a lot of the sites you’re using already use them, so you might as well go check out what they’re doing and how they’re improving so that you can do the same. Pendo.io.
And of course, we talked about two great sponsors. The first, we’ll do your books right. Software plus people equals you knowing exactly how much revenue is coming in and how much expense going out every month and are able to improve it, go check them out at bench.co/mixergy. And number two, if you want to hire a great developer, really don’t just take my word for it, go talk to them and you will see, you’re going to send me love notes about how great the people at Toptal are. Go to toptal.com/mixergy. Toptal.com/mixergy. All right. Todd, thanks so much for doing this. I bet you got a plane to catch now, so thanks.
Todd: Thanks man. I appreciate it.
Andrew: Bye: