Ep. 252: Eric Christopher is the Founder and CEO @ Zylo, the software management system built for the cloud pioneering a new standard in software management. To date, Eric has raised over $12m for Zylo from some of the best in the business, including Byron @ Bessemer, Salesforce, GGV, Semil @ Haystack, and the team at High Alpha. Prior to founding Zylo, Eric was the VP of Sales @ Sprout Social leading the revenue operations for over 11,000 customers. Before Sprout Social he was VP of Sales at Shoutlet, responsible for global direct and channel sales teams and developing and managing strategic relationships. Finally, prior to Shoutlet, Eric spent over 7 years at ExactTarget as a Senior Business Development Manager which is where he met High Alpha’s Scott Dorsey.

In Today’s Episode We Discuss:

* How Eric made his way into the world of startups and SaaS. What were his biggest takeaways from working with Scott Dorsey @ ExactTarget? What was the founding moment with Zylo?
* What have been Eric’s biggest lessons when it comes to making the transition from founder led sales to sales team? What would he have done differently with the benefit of hindsight? What were the biggest challenges in the process?
* How does Eric think about the importance of quantity vs quality of logos when acquiring your first few customers? Do big logo brand names really provide social validity or is it over-hyped? How does Eric think about discounting in the early days? What can founders do to really extract the most value from the discount they are giving away?
* Why does Eric believe that hitting the employee 50 mark is a huge moment for founders and the scaling of the company? What fundamentally changes? What gets harder? What gets easier? How has Eric seen his role evolve with the scaling of the team? How does Eric think about goal and KPI setting with a much larger team? What needs to change? How does one create and retain accountability and ownership at scale?
* Why does Eric believe that the bar for execution in SaaS in 2019 is so much higher than in 2009? What has changed? How does this make Eric change the way he approaches benchmarking, capital allocation, and growth? How did Eric find raising the Series A as a non-Bay area company?

 

Ep. 253: Leah Busque is currently a General Partner at Fuel Capital, an early stage venture fund located in Silicon Valley. She likes to invest across consumer, B2B saas, and technology infrastructure companies at the earliest stages. In 2008 Leah founded TaskRabbit, the leading on-demand service marketplace in the world. She spent nearly a decade involved with the company as CEO and Executive Chairwoman before she sold the company to IKEA in October of 2017. Hear about her takeaways from a product reboot with TaskRabbit.

SaaStr’s Founder’s Favorites Series features one of SaaStr Annual’s best of the best sessions that you might have missed.

This podcast is an excerpt of Leah’s session at SaaStr Annual 2019.

Missed the session? Here’s what Leah talks about:

  • What are the lessons learned from a product reboot?
  • When  bringing a product to market – what are the BHAGs?
  • How to navigate a product pivot.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Eric Christopher
Leah Busque

Below, we’ve shared the full transcript of Harry’s interview with Eric Christopher.

Harry Stebbings: This is the official SaaStr Podcast with me, Harry Stebbings, at HStebbings1996 with two Bs on Instagram. I always love to hear your thoughts and feedback on the show there. However, to the episode today, I was lucky enough to have Byron Deeter on 20VC the other day. When speaking about his incredible portfolio, we hit on one that I’ve wanted to have on the show for a long time now. I’m thrilled to welcome Eric Christopher, founder and CEO of Zylo, to the hot seat today. Zylo is a software management system built for the cloud, pioneering a new standard in software management. To date, Eric has raised over $12 million for Zylo from some of the best in the business, including Byron at Bessemer, Salesforce, GGV, Semil at Haystack, and the team at High Alpha. Prior to finding Zylo, Eric was VP of Sales at Sprout Social, leading the revenue operations team there for over 11 thousand customers. Before Sprout Social, he was VP of sales at Shoutlet. Finally, prior to Shoutlet, Eric spent over seven years at ExactTarget watching their incredible hyper growth as a senior business development manager, which is where he met High Alpha’s Scott Dorsey.

Harry Stebbings: I do also want to say a huge thank you to Byron Deeter, to Scott Dorsey, and to Semil Shah for some fantastic question suggestions today. I really do so appreciate that. However, that’s quite enough of me. Now, I’m delighted to hand over to Eric Christopher, founder and CEO at Zylo.

Harry Stebbings: Eric, it is such a pleasure to have you on the show today. I heard so many great things both from Byron at Bessemer and from Scott Dorsey. Thank you so much for joining me today, Eric.

Eric Christopher: Yes. Happy to be here. Thanks.

Harry Stebbings: I do want to get the ball rolling though, today with a little about you. Tell me, how did you make your way into what we both know to be the wonderful world of SaaS and come to found Zylo? What was that a-ha moment?

Eric Christopher: Great questions. I lucked into SaaS all the way back in 2002 when it was called ASP. The founders of ExactTarget, Scott Dorsey and Chris Baggett, were crazy enough to hire me after college. I was introduced to them, luckily, through an investor connection that I had after I had a failed startup in college, who inspired me to join ExactTarget at the time. After that, I spent the last eight years helping build two other startups. Most recently, Sprout Social in Chicago. Then, decided to come full circle back with Scott and his venture studio at High Alpha to start Zylo.

Harry Stebbings: Can I ask a strange question? It may be slightly out there. Why did you decide to start Zylo within a venture studio? It’s a relatively innovative and new model. Why did you decide that over starting alone in the wild?

Eric Christopher: I did not seek out the studio model per se. I think it helped that I had some relationship and trust with the team, particularly at the High Alpha studio. It certainly was, you think about taking the leap into being a founder of a company, assembling teams, and things like that, it’s an appealing situation when you think about you can maybe de-risk some of the things that really are hard at the early parts of building a startup. The combined value that the studio and then my experiences can bring together really makes you believe you can grow faster. Looking back, I think that’s certainly what’s happened for us.

Harry Stebbings: Totally. I do want to break the interview up into a couple of different parts that I think we’re both pretty passionate about. I want to start on the granular element of scaling. Specific function being the sales function. I then want to move to scaling the wider org itself. Then, finish on the macro, the landscape, and how it’s changed. Does that work for you, Eric?

Eric Christopher: Yes. That’s great.

Harry Stebbings: If we start on the scaling the sales team, the single biggest question I get from early stage SaaS founders is always on the transition from founder to sales team. You’ve done this extremely successfully with Zylo. With the benefit of hindsight, what were the biggest lessons from this transition?

Eric Christopher: It’s always a work in progress, by the way. Maybe first start with, why are founders successful in the beginning to sell? Founders are successful because they’re the most passionate about what they’ve created. They can say yes to really anything they want to early on. That’s the advantages of founders selling. Sales people, they’re not going to have those same super powers. They can only say yes to a few things. What you need to do is make sure that you found something, a focus area that’s repeatable and you can teach them how to win. Then, you’ve got to find ways to allow them to learn that expertise through you, through observing or participating with the sales process. The lesson learned is it’s not about the revenue or the customer number as a signal, it’s that you’ve found a big focus area that you can win repeatedly, teach others, then build a culture of winning.

Harry Stebbings: Can I ask you two questions that I’m too interested not to? One is, I always have a problem as an investor in backing founders that can’t sell their own product. Is that short sighted of me, do you think, or do you think that’s actually fair?

Eric Christopher: Yes. I think it’s interesting. I think a lot of great product CEOs are really good at selling. In today’s day and age, it’s about you believing the technology and you can match it to values. It’s not about the convincing sales rep or the old school view of a sales person anymore. Look at Eric Yuan at Zoom. He’s probably one of the best sales people in the world, but it’s also because he just believes in what he’s doing, just builds a great product, and is an evangelist about it. I think it’s a good signal that, two things: If it’s selling, it’s because the product’s so good and the founder’s really good at it, or if they have work to do on the product, at least they’re passionate enough about it to make it happen in the early days, which you want that in founders, as well.

Harry Stebbings: Totally. I do get you there. Can I ask also, when you realize that you have some form of repeatable process in terms of the sales process that works for you as the founder, do you document it along the way? Or do you find that it happens haphazardly? Then, when you realize that you need to hire a sales team, you then have to go back and document the process?

Eric Christopher: Yes. I think it’s a light documentation process. You find a pattern that a lot of the times, it might be a trial or a proof of concept process that you start to see that if you can get each customer to go through a series of steps, that they’ll convert. Most recently, for us, we have this POC process where we just know every ten of those that we start, we’re starting to understand how many are going to convert in the time period it takes. Within that, there’s lots of different steps and variations still at our stage. Just having that framework of a few milestones that you know can be repeatable, that I think is enough for you to feel like you can start building sales teams around.

Harry Stebbings: Totally. In terms of building the sales team around, you’ve now done this with Zylo. What were those big lessons for you, Eric?

Eric Christopher: Thinking about the lessons that I’ve learned, you really have to listen to your gut and when it’s time to build sales, not just listen to an investor or a board member that says, “It’s time to hire your first VP of sales,” or some SaaS metric, or something like that. I think it’s something that, for me, is trusting my gut. I think even if you’re a product CEO, can do that, as well.

Harry Stebbings: Totally get you. Can I ask in terms of trusting your gut, how do you balance between trusting your gut and also the advice you get given? When you have successful people like Scott Dorsey around you telling you, “Now, we need to hire sales. Now, we need to hire sales,” and you don’t believe you’ve got a baked out process, how do you balance between advice and gut?

Eric Christopher: That’s a good question. I talk a lot about how gut is actually your set of experiences that you’ve had in life. That’s what your instincts are made of. It’s not just an emotional feeling. You’re actually referencing your experience. You as a founder, no matter if you’re working with Scott Dorsey, Byron Deeter, or anyone, for that matter, that has a lot of experience, they have a different set of experience. As investors, they see a lot of patterns. That’s their value. They’ve seen lots of different things that have happened. Maybe with Scott, he’s an operator. He’s had ten years experience of ExactTarget plus the patterns. He’s not at Zylo. He’s not experiencing first hand the things that we’re seeing. As a founder, you just have to have confidence that every day, you’re talking to customers and collecting information. That information is just as powerful and just as influential. You use your advisors to balance what you’re experiencing against those patterns. That is, to me, the right balance. That’s what the gut feel really means.

Harry Stebbings: Can I ask? When you kind of do a self analysis of the transition, is there anything that you would’ve done differently?

Eric Christopher: Yes. That’s a great question. I think that focusing a bit on the focus areas earlier and listening to those. I mentioned you can say yes to everyone. You can end up having customers have different value points and things like that. I think focusing on what’s that one big thing that every single customer in the world will want or that we believe, and focus in on that. Then, get reps to really focus on that, versus trying to sell the entire broader vision like a founder would. We’re doing that now successfully, but it just felt like it took a little longer because we didn’t really focus on that one big thing early on.

Harry Stebbings: I totally get you in terms of that focus. You said there rather than saying yes to everything. It brings me to two questions that founders always ask me when they think about the sales process, specifically with early stage SaaS. Number one is, the quality or the quantity of logos. What should founders focus on? As many as possible or that one or two brand names?

Eric Christopher: I love this one. It depends on how you define quality of logo. The way that we define it and that I define it is, it’s a target profile customer that gets a lot of value immediately out of what we do and will likely stay with us for a long time, versus just a hot logo that investors think are great. I think if you think of it that way, you then will look at that and say, “Which total addressable market is the best?” Is it SMB or is it Enterprise? You make that decision based on the fact that your profile fits either an SMB or Enterprise. You have a conviction and decisiveness to just pick one. Then, go build a monster business, not try to be everything to everyone. I think the answer sometimes can be both, but really focusing on that will give you the answer. Then, you can decide, is it a high volume play in the SMB? Is it go out for bigger customers?

Harry Stebbings: Can I ask? Do you think the quality of logos really works in terms of social validity? People, I think, often over emphasize how much having a big name logo actually brings in subsequent customers. Is that fair? Do you think it really is incredible social validity?

Eric Christopher: I think one thing that’s an interesting trend is that a lot of early SaaS companies sell to a lot of other SaaS companies because they’re early adopters. They’re more willing to buy new technology and things like that. I do think quality of logo of the brand matters, but the honest reality is a lot of the early startups have a lot of the same customers. I think investors or conviction of the business for the long term, you really need to make sure that you’ve got more of a type of customer that really does feel like it’s going to be with you for the long term. I think that it’s really more about if you’re going to say you’re Enterprise, do you have proof points that large Fortune 500s are adopting the product? Then, are they growing? Are they spending more? Are they seeing value where they want to lock in for longer term contracts and be with you for the long haul? Those sorts of things. The logos are great, but you got to balance some proof points like how much money they’re spending with you or what they’re saying about the product and how it’s changing their businesses. Things like that. It’s the story behind the logo is the important thing, not the logo.

Harry Stebbings: I love that story behind the logo, and couldn’t agree more in terms of customer case studies and their importance. I do want to ask another bit. It’s one thing that we came back to saying yes to too much. It’s the element of discounting. In the early days, you obviously have less leverage and brand to price strongly. How do you advise founders when it comes to discounting, and what they should and maybe shouldn’t accept?

Eric Christopher: You really can’t avoid discounting discussions. That’s just a reality of our business. I have a few rules of thumb that I follow. The first one would be to ask for two things for the discount versus one. For example, a two-year agreement and logo rights are two good things that are valuable to a business. Maybe another one might be time. Time is the silent killer of most startups. If you can get a customer to move forward and trade some time, maybe you can discount that to start getting to work. Then, you can always fall back to one. It’s just a good negotiation is ask for a lot for it because discounting and revenue are just really important. That’s a big ask and you should make sure you get something back from that. The second thing that we do is, we have a goal every quarter of we set a new minimum contract floor. Then, we also set a target to grow our average contract value just in general. If you keep those in mind and you’re discounting, you’re still growing your business. You’re getting more value out of your customers. Still able to use discounting to win business, which is important. I think just always remember to be disciplined and demonstrate value before you start discounting as well.

Harry Stebbings: I couldn’t agree more. You said about time being the silent killer there. Agreed. Do you always insist on multi-year contracts being paid up front, with that in mind?

Eric Christopher: Time is the silent killer and running out of cash. I think cash collections are really important. In a lot of larger companies, they’re completely okay with giving you two or three year payments all up front. I think that’s a really good ask, especially for discounting. Also, just a good ask in general. The other thing too with the long term commitment, you’re mutually set up between you as the customer and you as the SaaS provider to build for the long term. A lot of times when you’re in the early stage, you need customers that will be with you and want to invest in your product road map, and commitments and things like that as well. That’s another good reason to really pursue a longer term contract

Harry Stebbings: I couldn’t agree more. I think fully paid up front would make me very happy. I do want to move one level above the scaling of the sales team itself to more the scaling of the org. We chatted before. When we chatted, you said to me that the employee 50 mark was a real difference to you. Eric, why was that employee 50 mark so different for you? What fundamentally changed?

Eric Christopher: I talked to other founders about this too. It feels like others feels this as well. That 50 is just a good number that a lot of people have in common where things just feel like they change. Are you familiar with the game of telephone? You sit around the campfire and whisper into someone’s ear. Then, when it comes back to you, it’s something different than what you originally said?

Harry Stebbings: Totally. We call it something different in the UK, but yes.

Eric Christopher: That’s a real reality. All of a sudden, you’re not just a few employees sitting around a conference table able to tell everyone what’s going on with every customer engagement or what the product team is building and have quick company meetings any time you want. That sort of thing. At 50, that game of telephone begins to play out. It’s more important and critical than ever to have a lot of discipline on how you communicate, how you’re setting goals, and making sure everyone’s aligned in the vision.

Harry Stebbings: Totally agreed with you there. Having been through that and having scaled through that process, what do you advise subsequent SaaS founders who are maybe approaching that or looking at the next 12 months, thinking that’s their ramp time?

Eric Christopher: I think the most important thing to do as a founder is, from day one. If you haven’t done this already, you’re late and you need to focus on it. Really invest in values and what you stand for. You need to really have your vision clearly articulated and a lot of the key goals of what you need to accomplish over the next quarter or year. Start towards that journey. Doing that from day one, even though it might feel a little, say, big company, or–because you start thinking about putting values on the wall and that sort of thing. The more that you institutionalize that and put that into the DNA of the company, the rewards are tremendous. I think that’s the biggest thing that I’ve learned from others. Always remember to iterate on it constantly, grow, change, and evolve as your company grows.

Harry Stebbings: I’m really interested. You said the word grow there. For you as a CEO, it’s a difficult transition to watch and to really be at the center of. Can I ask? How have you seen your role alter and change with the growth of the company past this point? How have you adapted as a result?

Eric Christopher: I like to use a sports analogy for this. Very quickly as a founder, you move from a player to a player coach. That role as a coach you’re directly overseeing others work. Before you know it, at that employee 50 or as you’re growing, you’re a little bit more like a GM, where you’re not only responsible for the players on the court and the execution, but now you’re responsible for the coaching staff and even thinking about next year’s team. You’re recruiting for it, what it’s going to look like then, and its dynamics ahead. That’s been something that very quickly was earlier than I expected. I’ve had to learn how to live in a current moment sometimes with mistakes that I’ve made one or two quarters in the past. You have to have the patience and control to be able to fix things going forward. It’s like when you’re GM, you’re not the one making the game winning shot, you’re hoping that decisions you made and the people you put out there are the ones that are finding success. That’s been a really hard thing to come to think about and how to manage. I’m learning every day.

Harry Stebbings: Speaking of being that coach and if we carry on the sports analogy, putting the team on the field to shoot the hoops, I think is what you delightful Americans would say on basketball terms. If we keep with that in terms of goal setting, how do you think about setting ambitious enough goals which are really a stretch for the team and ambitious for them to hit? But then, also not too ambitious where they’ll be disincentivized when they potentially won’t hit. How do you think about that balance?

Eric Christopher: This is such a hard one. I think that probably a topic that needs to be talked about a lot more, especially amongst peer CEOs and stuff like that. We use the popular goal setting framework started at Google, the OKR. That’s worked well for us. We have a core value that we use called Set Big Audacious Goals. That’s how we think about it. At an early stage, it’s hard to set goals because you’re starting from scratch. What we’ve done is we look at what world class growth looks like. I speak to Byron about this, or Scott, or others. Then, I really try to establish goals that could allow us to meet a very high bar, but set personal goals that the sum of those will allow us the chance to hit that. That’s just how I think about it. The nice thing about other SaaS companies publicly sharing metrics and for investors, you can get an idea of what’s possible. Then, you try to look at yourself and see, can I come close to that? Do we have a business that could exceed that? That’s how I think about it. I constantly look for those signals of other growth rates and things like that. Then, see if we can competitively keep up with that. That’s the way I look at it.

Harry Stebbings: I’m really pleased you said that about competitively keeping up with growth rates and that benchmarking element. When we chatted before, you said to me about it being very different in 2009 versus 2019 with regards to the bar of execution and really the path to success just being fundamentally different. Can I ask? What makes ten years ago so different to today? What is it?

Eric Christopher: I think about in 2009, a success story that you’d see in the TechCrunch and a big outcome would be that you built a billion-dollar company over eight to ten years. It was a unicorn and it was very exceptional. There was very few. You look at where we are today and what was the number in your recent podcast with Byron? He has 14 companies in his portfolio alone that are valued over a billion. There’s other great investors as well that have great track records. A real success story today is to build a billion-dollar company over half that period of time or just a few years. The outcomes, the size, the sheer growth, all the sorts of things are just a higher bar, no question.

Harry Stebbings: Totally with you in terms of it being a higher bar. I do have to ask. You know me, I stalked the shit out of you before this show. I spoke to Samil Shah as well. He also said to me about fundraising outside of the bay. One of his questions was, what’s the raw truth about raising of series A when you’re not in the bay area or New York?

Eric Christopher: There is, no question, some disadvantages. They can be overcome, you just have to put in a plan and execute it. When we raised our series A, one of the investors I talked to that lives in the bay area asked me, “Are you going to rent an apartment out here for a month or two, bring the family, come raise, and stay out there?” I think the real reality is, first off, there’s going to be a certain profile of investor that likes and maybe even prefers to invest out of the bay area. There are some that love that. There’s many also that really, and even told me directly, there’s enough opportunities and investments to make in the bay area and they just stick there. That’s fine too. The key is that you have to run a real process where you talk to a lot of investors and shake out profile of fit. I want an investor that wants to come and build the company support, the technology community of Indianapolis, Indiana where we’re based.

Eric Christopher: Byron was one of those individuals. I also think that always fundraising and relationship building is really important. Every time that I travel to San Francisco, New York, or other markets, typically I’m meeting with investors to build relationships and find those attributes out of someone that wants to invest out of the Bay Area. It’s certainly something you have to overcompensate with when you’re not able to just grab coffee down the street with most of the investors that are in the Bay Area.

Harry Stebbings: Can I ask? Is it actually not also quite helpful to be outside of the Bay Area to always be raising? Then, at least that’s real deliberate intention to your meeting with investors. Even for a coffee where they’ve deliberately sought you out and spoke to a long time ahead with your days for that trip compared to wasting endless hours just because an investor’s in the next door block, it works, and is much more haphazard.

Eric Christopher: That’s a good question. I do think that because we’re not there every day, that when we are in town, it’s maybe a bit more of a special opportunity to meet us and see what we’re building. One thing I would say, too, is that, as much as I just mentioned you might have a Bay Area investor that’s not interested in investing in the MidWest or something like that, all of them have generally been helpful, are willing to meet, and give me great ideas about the business. I think that generosity of time and things like that. That’s so hard for everyone. Everyone’s so busy. The fact that I’m not there every single week and day helped get some of those meetings. I tend to have a lot of luck through the network of someone being interested in learning about our business, for sure.

Harry Stebbings: Totally with you. That makes a lot of sense. I do want to move into my favorite element, which is the 60 second SaaStr. I say a short statement. Then, you hit me with your immediate thoughts. Are you ready to roll?

Eric Christopher: Yes. Let’s do it.

Harry Stebbings: What do you know now that you maybe wish you’d known at the beginning of your founding with Zylo?

Eric Christopher: Every stage is really hard in our business and building a company. Enjoy every stage because they’re all hard. Just keep the average curve in mind. Don’t dwell on the ups and downs that are just inevitable of being a founder.

Harry Stebbings: My favorite myth of all is it gets easier. I’ve never found it ever gets easier.

Eric Christopher: That’s not true.

Harry Stebbings: They lied to you. What is the toughest role to hire for today? Why?

Eric Christopher: Data science. We are growing our team, building it. It’s a big priority for us. A really competitive process with the candidates. Many candidates are international, so you’re dealing with visa issues and all the challenges with that. That’s top of mind.

Harry Stebbings: If the money’s on the table, take it. Agree or disagree?

Eric Christopher: I’m going to say take it, but only if you have a number in mind and the ideal fit clear in your mind of what that is. Whether you’re selling a deal or selling your company, be purposeful and have that in mind. If not, then stick with it, build value, and don’t look back.

Harry Stebbings: Love that nuance. Brilliant in the middle there. What is dark mode, the biggest killer product feature for 2019?

Eric Christopher: You might have read my tweet earlier this year.

Harry Stebbings: I did indeed.

Eric Christopher: Just a running joke that every major world class company, that’s their road map feature. It’s like Apple, Slack, everywhere you look, that’s the innovative feature that everyone’s launching. I do think it’s quite needed because everybody needs more sleep. I think that dark mode is supposed to help with that or something like that.

Harry Stebbings: That’s hilarious. I want to finish on building Zylo outside of the valley. We touched on it before. What’s the one biggest pro? What’s the one biggest con?

Eric Christopher: Pro. I think the biggest pro is that you can focus more with less noise. I’ve got a few different things like cost and those kind of things. I think that’s a real advantage that we have. Con would be, I think a lot of great companies are overlooked by VCs and things for some of the things we mentioned earlier.

Harry Stebbings: I couldn’t agree with you more in terms of some of them being overlooked. Eric, as I said, I heard so many great things both from Scott, from Semil, from Byron. It’s been so much fun having you on the show. Thank you so much for joining me.

Eric Christopher: Thank you very much.

Harry Stebbings: Absolutely loved having Eric on the show there. Such exciting times ahead for Zylo. If you’d like to see more from us behind the scenes here at SaaStr, you can on Instagram at HStebbings1996 with two Bs. I do love to see you there. As always, I cannot thank you enough for your support. I can’t wait to bring you a phenomenal episode next week really diving into the sales process.

 

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