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Scaling a SaaS Business to 11,000 Customers: CEO Josh McCarter (Part 4)

Posted on Thursday, Oct 6th 2016

Sramana Mitra: What happened after you raised the $15 million? How did the business move? What were the strategic moves that you made to get to the next level?

Josh McCarter: The major move that we made was, we started investing in sales and marketing. We started building out our team. We took on some larger contracts that, in hindsight, were not the best things for us to do over the long-term for the company. They were big contracts. They were big name companies that helped us gain credibility with our investors and with other people in different segments. They were all multi-million dollar, multi-year contracts.

Sramana Mitra: What was wrong with those contracts? Typically, multi-million multi-year contracts are good news. Why was it bad news?

Josh McCarter: At the end of the day, what we found is that there is a lot more opportunity in the SMB market than there is in the enterprise space. At the end of the day, the enterprise businesses really require a lot more account management. They require a lot more professional services. We’re trying to be a SaaS model that has one product that is configurable to multiple businesses and configurable to various different verticals and not be a professional services shop that ends up highly customizing its software for one defined business process. That was a good learning we had along the way. That happened after three to four years of a lot of work and a lot of frustration.

During that time, it was in the early days of the contract. It was awesome. We had a lot of excitement around these big deals. We were pushing into new categories. We had some large marquee customers that we could point to. As we continued developing, we had one part of the company that was focused on these large deals. We had another part of the company that was focused on driving hundreds of contracts a month through various small to medium businesses.

That’s where things started getting into your question about focusing on customer acquisition because we’re growing extremely well and fast but we were doing it not as efficiently as we should have. We over hired on the sales side and were spending more money on the marketing side. We had to make adjustments. One of the things that really helped was that our Series B round that was sponsored by Bain Capital Ventures. SaaS, at that point, had evolved to become much more mature.

People had research reports that you could look at and say, “These are the relevant metrics that you need to focus on in order to have a healthy SaaS company.” As Bain saw our growth and potential, they decided to invest. Over the course of the next six months, we really brought in SaaS metrics rigour and mindset into the company, which is great because it served as the foundation of how we’ve evolved the company since that point.

Sramana Mitra: This is probably one of the most interesting conversation points that we could have. How did you work through the process of getting to that rigorous metrics-driven organization? What did you learn in the process about unit economics and customer acquisition strategy?

Josh McCarter: In the diligence process with Bain, they were asking a lot of questions that we had never heard of or looked at. That was an eye-opener. I didn’t have a CFO at that point. I had raised Series A and B without a CFO. I ended up deciding that I wanted to bring in a CFO who had a SaaS background. I really became a student of SaaS. I had a great partner in Deepak Sindwani who led the investment from Bain. He was very astute. He was their lead SaaS investor. He had seen tons of different businesses. We spent a lot of time together sharing articles, blogs, books, and really digging down into it.

For six months, I became a real student of SaaS and made sure that SaaS jargon, reporting, and metrics really became infused in the way that the management talks with the different departments and teams about the health of the business. It goes into all of our planning meetings. It goes to all of our town halls. If you don’t have a visibility on the metrics and don’t discuss the metrics and share it, then it’s pretty hard to go from not having that mindset to having it. It has to be embedded into the language and culture of the business.

This segment is part 4 in the series : Scaling a SaaS Business to 11,000 Customers: CEO Josh McCarter
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