Ep. 276: Liat Bycel is VP of Customer Engagement @ Airtable, the startup that works like a spreadsheet but gives you the power to organise anything. To date, Airtable has raised over $170m in funding from some of the best in the business including Thrive, Coatue, Founder Collective, CRV and individuals like Patrick Collison, Ashton Kutcher and Raymond Tonsing to name a few. As for Liat, prior to Airtable, she was the Chief Revenue Officer @ Assist. Before Assist, Liat spent 6 years at Twitter where she first hand saw their hyper-growth, managing a team of 40 across New York and SF and also Liat achieved 102% to quota on average every year. Finally before Twitter, Liat was VP of Sales @ Revolution Prep where she led and managed 7 offices.
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In Today’s Episode We Discuss:
* How Liat made her way into the world of SaaS and came to be VP of Customer Engagement at one of Silicon Valley’s hottest startups in Airtable.
* What were Liat’s biggest lessons from Twitter on how to hire successfully? What were some of the key takeaways from that experience on how, why and when to fire? Is there ever a right way to do it? How does Liat think about aligning both the personal ambitions of the person with the wider objectives of the company? Why does Liat reject the notion of “hands off leadership?”
* Companies often worry about whether to go horizontal or vertical, how does Liat personally think about this choice? What does she advise founders as a result? What are the core questions they should ask to determine their strategy? What are the biggest challenges of having such a vertical product? How does it impact messaging and brand? Product roadmap? Pricing?
* How does Liat think about challenging the traditional sales model? How does that challenge the structure of the conventional AE and SDR structure? How does Liat think Airtable is pushing up against the traditional customer success model? How has having children impacted how Liat thinks about operating today? What changes with children?
Ep. 277: When is the right time to go upmarket and how do you serve small, medium and large customers in the same company. SaaStr CEO Jason Lemkin sits down with Shopify Plus GM Loren Padelford to discuss.
This episode is sponsored by Owl Labs.
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Jason Lemkin
SaaStr
Harry Stebbings
Liat Bycel
Loren Padelford
Below, we’ve shared the full transcript of Harry’s interview with Liat Bycel or you can jump to the transcript of Jason’s interview with Loren.
Harry’s interview with Liat:
Harry Stebbings: You are listening to the official SaaStr to podcast with me, Harry Stebbings at HStebbings1996 with two Bs on Instagram, but to our episode today, and who does not love the Airtable product and who wouldn’t love to know the inner workings of Airtable as a company? Well today I’m thrilled we can reveal more as we welcome Liat Bycel, VP of Customer Engagement at Airtable, the startup that works like a spreadsheet but gives you the power to organize anything. To date, Airtable has raised over $170 million in funding from some of the best in the business, including Thrive, Co2, Founder Collective, CRV and individuals like Patrick Collison, Ashton Kutcher and Raymond Thompson, just to name a few. As for Liat, prior to Airtable, she was the Chief Revenue Officer at Assist. Before Assist, Liat spent six years at Twitter where she firsthand saw their hypergrowth, managing a team of 40 across New York and San Francisco, and Liat to also achieved 102% to quota on average every year.
Harry Stebbings: Finally before Twitter, Liat was a VP of Sales at Revolution Prep where she led and managed seven offices. I do also want to say a huge thank you to the wonderful Howie Liu, Airtable’s founder, for some fantastic question suggestions today. I do so appreciate that my friend.
Harry Stebbings: However, I’m now delighted to step aside and welcome the very wonderful Liat Bycel, VP of Customer Engagement at Airtable.
Harry Stebbings: Well, Liat, it’s absolutely fantastic to have you on the show. I’ve heard so many great things, especially from Howie, but thank you so much for joining me today.
Liat Bycel: Oh, thank you so much for having me, Harry.
Harry Stebbings: Not at all, I’ve been excited for this one, but I do want to start on you. So tell me, how did you make your way into the wonderful world of startups and bluntly how did you make your way really to the rocket ship that is today Airtable?
Liat Bycel: Yeah, so I’ve been at startups for most of my career. I was the 12th employee of a test prep company that grew to close to 200 employees by the time I left, joined Twitter when they were really starting to build out the sales organization in early 2011, as the first sales manager hired, and after being there for over six years, I really missed the building stage of the company. I joined when there were 350 employees, and by the time I left there were over 4,500. So left Twitter to join a super early stage startup in the AI and messaging space, and once I knew my time up was there, I started thinking about what was next. I thought I was going to join a later stage company after the intense 18 months I had at an early stage startup because I felt like I needed something a little bit different.
Liat Bycel: But Dick Costolo, the previous CEO at Twitter, who is a good friend and mentor of mine called me and said, “Hey, don’t join those other companies you’re talking to before meeting with Howie from Airtable,” and I knew Airtable of course, used the product a bit, loved what they were building. Just thought I wanted something a little bit later stage, and then I met Howie and then everything changed. I learned about his incredible vision, not only for the product, but his vision for the type of company he’s building. And a few hours into our coffee chat, I knew I was going to work here, so it was a pretty powerful experience for me.
Harry Stebbings: Well, well done, Dick. I think that’s one hell of a recommendation, so that’s awesome to hear. I do want to dig in there, because you were such a transformational moment in Twitter’s trajectory, and so kind of diving in there and really starting on the people side, I’d love to hear what were your biggest lessons on how to hire successfully at such scale?
Liat Bycel: Yeah, I would say the biggest lesson that I took from my time at Twitter, especially in the early days, was never to shortcut on hiring. It’s so important to have a rigorous recruiting process, including checking references and back channels. This was definitely a challenge for us at Twitter when we were hiring 10, 15, sometimes 20 people at a time, and then it was so important for us to stick to the process. It was also really interesting to realize that it was really about hiring people that are flexible, resilient, and folks that really embrace change. When joining any high growth company, you need people who are amazing problem solvers, who are smart, scrappy, and can really thrive in a fast changing environment. I think you can coach business acumen and how to sell unique elements of your product, and it is so much harder to coach or change attitude or inflexibility.
Harry Stebbings: I totally agree with you in terms of that kind of mental plasticity. Can I ask though, in terms of keeping pipe full in the candidate pool, how do you think about that and how do you think about working with recruiters? Often early stage startups post raise need to scale and hire quickly. How do you think about keeping that pipe full and working with recruiters?
Liat Bycel: Yeah, I think working with recruiters is absolutely necessary. I think that the earlier that you can start working with recruiters, the better. I think that keeping the pipeline full has a lot to do with what you’re doing externally in working with recruiters, what you’re doing internally in building out your recruiting team and you’re in that function, as well as building a really strong referral culture. I think that some of the best hires definitely come from your employee pool and that has definitely helped us keep our pipeline full, both at Twitter and at Airtable as well.
Harry Stebbings: Can I dig in on the referral element? Because I had Alex at Clearbit on the show and he said that he literally used to sit candidates down, or sit current employees down and say, “Hey, let’s go through your LinkedIn together. We’re going to get some referrals.” How do you really instigate and activate a referral program?
Liat Bycel: We obsess over it and talk about it all the time, so I totally agree with Alex there. I think it’s really important to sit down with new hires, make sure that they understand who are the top priority hires that we’re looking to fill, what are the highest priority positions and dig into their networks. Think about the best people that they’ve ever worked with, that they would die to work with again and really make it a part of your every day. It shouldn’t just be like a referral blitz that you do once a quarter, but something that’s talked about at company all hands, at team meetings, in one-on-ones to really continue to make sure that that pipeline is full.
Harry Stebbings: Totally. No, I couldn’t agree more in terms of that continuing effort. In terms of the hiring at cadence, so often that the quality will sometimes vary and only be revealed post hire. What were some of the takeaways from that experience? So kind of the how, why, and when to maybe let someone go.
Liat Bycel: Yeah, I wish there was an easy and consistent answer to this. I think it really depends on the person and the situation. A few takeaways for me from my Twitter days was that someone wasn’t the right fit and we knew it, in the first couple of weeks we always pushed to move as quickly as possible. There were some situations where a few individuals demonstrated enough ability and got through the training but were not meeting expectations and after a few quarters when it became clear, we would move forward with a performance plan, which typically, but not always, would lead to termination. I think in general it’s only fair to the team, especially to those top performers, for the leadership of that organization to address performance issues as soon as possible.
Harry Stebbings: Can I ask, how do you think, a lot of people often talk about internal migration from different role when something’s not working, so maybe Jack is not being a great SDR, but maybe we could get him working actually in the AE division, and that might work better. How do you think about internal transition between roles and when to try that versus actually when to cut your losses?
Liat Bycel: Yeah. I think that if it’s very clear that the role isn’t the right fit for the individual, but they do have a raw skill set that could absolutely be beneficial to the organization, I think that’s very, very important to think through and address.
Liat Bycel: I think that when thinking through a career path, it’s super important that there’s alignment between individuals’ career ambitions, and also what is best for the company. So as long as there’s alignment there, I’ve been open to that in the past and I think that those opportunities will continue to exist when sometimes people just don’t start within the right role that’s truly focused on their skillset. So if you can make that change and you can see that person be successful in another type of function or role, that’s fantastic as long as it’s aligned with what the company needs.
Harry Stebbings: I love that alignment of personal ambitions and the objectives of the company. In terms of uncovering those personal ambitions, often you might hear one thing from the candidate and it may not be actually their true personal ambitions. Is there a way to really uncover that and ensure that it does then align to the company’s core objectives?
Liat Bycel: Yeah, I think that career development conversation should be an ongoing conversation. So starting in the interview process to understand what are their true ambitions and then as they start on the job, really having that understanding and alignment between the manager and the individual in terms of how they want to grow, what they want to develop, what are some weaker areas that they really want to focus on. It’s really important to dig in there so it’s not just, well I want to be the CEO of a company one day just because that’s something that I’ve always said and it’s gotten a good response. I also think that career paths and developing those are really, really important to help people stay motivated and really feel they’re growing in their own careers. Again, as long as there’s that alignment between their own ambitions and what’s best for the company. If I were to only do what was best for me or what was best for my team when it wasn’t really what’s best for the company, we would run into a lot of issues. So it’s definitely important to align the two and make sure that the managers are empowered to help set those expectations and to help people really discover what their ambitions are and how to align their skill sets to match.
Harry Stebbings: You mentioned the managers there, and you’ve said to me before that when it comes to management that you maybe reject the notion of hands off leadership. What did you mean by that rejecting the notion of hands off leadership and then how do you think about leadership with that in mind?
Liat Bycel: Yeah. I don’t think leadership is about pure delegation nor about micromanagement. So it’s not only about living at the 10,000 foot view or losing the forest for the trees, but it’s about constantly and effortlessly being able to transition back and forth as needed. There are times when I’m in the weeds with my team figuring out a new process or something or helping to solve a specific customer issue, and there are times when I’m empowering my team to own a project end to end, or focused on setting the vision for the next year. So to me it’s about hiring well, empowering those hires with the right context and strategic direction to really know how to create the impact that truly matters and understand why they’re doing what they’re doing so then they can use their creative energy to get the right thing done without having to be super prescriptive in instruction. So hand off leadership just doesn’t really resonate with me because I think it’s not one or the other. It’s actually just being able to be flexible throughout.
Harry Stebbings: In terms of understanding why they’re doing what they’re doing, often that’s kind of driven by product and what it can really enable the user and the customer to achieve with the product. I’m really interested because a question that I often have with my companies and companies I meet is whether we should go wide, or deep, or horizontal or vertical, another way of putting it. In my head, Airtable is a horizontal play. How do you personally think about the horizontal versus vertical debate and then where would you say Airtable sits?
Liat Bycel: Yeah. One of the beautiful things about our product is that Howie and Andrew and Emmett went slowly and so deep with the product in the early days that it’s inherent in the product design to be able to grow horizontally. Airtable enables anyone to build their own useful collaborative business applications, and we have the opportunity to set this up both vertically and horizontally. So one of the reasons why Airtable is so great is that it can be anything to anyone. So it is horizontal, but also in a way vertical since each use case of Airtable is effectively a highly vertical application. It serves a wide diversity of different customer use cases, different industries, buyer role types. Like we’re not selling to the same exact buyer every single time. But the value prop also changes distinctly between different use cases and industries. So with Airtable, customers are actually building their own domain specific applications. The value for a video company is production related, and the value for a construction company for Airtable is specific to that construction use case.
Liat Bycel: So it’s very, very different than other horizontal products out there and we give people the building blocks that they can use to realize what those infinite possibilities are.
Harry Stebbings: Before we get into the pros and cons of having such versatility of product, when you meet early stage founders today and they ask, “Do I go horizontal or do I go vertical?” What do you advise them and what are the questions that they should ask to maybe determine their strategy?
Liat Bycel: If you can’t go deep anywhere, you can’t go wide. So if you’re okay at a bunch of things and not great at anything, then who is really going to care about what you’ve built? I think it’s really important to be great at one thing and then worry about doing more. Some of the questions I would ask are, who is your market? What is your focus? It’s about being thoughtful around the sequencing. It’s very unusual that Airtable is uniquely positioned to do both, which is why as a sales and customer facing leader, I’m so excited about the opportunity in front of us.
Harry Stebbings: It is such a big opportunity in front of you, given the versatility. On the flip side, I’m sure there are challenges. What are the biggest challenges of having such a truly versatile and horizontal product like Airtable?
Liat Bycel: Yeah, since Airtable can truly be anything to anyone, it can also bring a lot of different challenges. So what we think a lot about internally is how do we create the necessary scaffolding to onboard different kinds of users when their use cases are all completely different. So many times it’s the person creating the workflow that deeply understands and knows how they need the tool to work versus being forced to change the way you work because of the tool, and having the ability to have a horizontal kit, kind of like a toolkit, that you can go and build what you need to be collaborative and impactful in what you do is exactly what we’re building. So it shouldn’t be the software company in Silicon Valley dictating how you do your work. And our product team has built such an amazing product that it’s our job on the customer engagement team to truly unlock it’s potential.
Harry Stebbings: In terms of unlocking the potential, you said about the onboarding process there. I’m always fascinated by onboarding processes. What have been some of your lessons in terms of how to do onboarding the right way?
Liat Bycel: Yeah, what we’re experimenting with right now is actually a customer experimentation team that is really helping to decrease the time to value that customers get when they sign on to Airtable. So in your first 14 days you would have the opportunity to hop on a screen share with a product specialist to really understand your use case, understand what you’re really trying to build and help guide you through the process. So I think it’s both important to understand what’s needed on the product side and it’s also important to recognize that sometimes that human powered types of experimentation, which will actually lead into a pretty big opportunity for the company, and that’s something that we’re hyper focused on right now.
Harry Stebbings: I’m so sorry to go off schedule, but I am too interested. In terms of optimizing that customer engagement, as you said, with that human element there, does your role today really optimizing the customer engagement element, does that ever maybe come into contrast again, maybe a Chief Revenue Officer or a CFO who’s thinking about the bottom line and margins when one has to bring in costly human intervention for maybe smaller contracts?
Liat Bycel: Yeah, I think the way that we’re thinking about it is it’s very, very unique to have all customer facing teams under the same roof. And that’s how we’ve really organized this team so that there’s true alignment in both goals and incentives and making sure that we are doing everything possible to speak the same language, to make sure that our priorities are aligned, and that our customers are getting the best possible experience. I think that too often in other organizations, whether it’s sales and customer success being completely siloed, or sales not really understanding what goes into handling thousands of support tickets. So having all of those teams aligned has really, really helped us to make sure that every decision that we make is through what is best for the customer. And we have that customer lens in every move that we make as an organization. So for me that’s what I’m focused on in building out this team and we’re just getting started. So there is definitely still a lot to learn.
Harry Stebbings: Totally. And in terms of going back to the challenges of the versatility of product, when it comes to messaging and brand, you mentioned looking at some very interesting cases there including construction and then also your traditional tech startups, you could name any industry given the versatility of the product. How does that fundamental versatility affect how you think about messaging and brand?
Liat Bycel: Yeah, it’s a really good question. I think because it’s so horizontal, the messaging really needs to be emotionally resident. Our audience is made up of change makers and people that are constantly wanting to improve and are not okay with the status quo. By democratizing software as a medium, we are changing the way the world sees and interacts with software and that allows everyone to realize their true value and build whatever it is they need to be the most successful. So I think our brand messaging is very human centric and needs to continue to be all about our users.
Harry Stebbings: Is it also challenging in terms of pricing, given the fact that one has to have consistent pricing, but also you might actually not have optimal value extraction for the product dependent on who’s using it and what sector they’re in. Is that ever a question or concern for you?
Liat Bycel: It’s not a concern but definitely a question. I think our pricing strategy will continue to evolve. The core product is a free version so there’s nothing less than with our free product, which is truly amazing. I think that knowing that this product isn’t a product that is hidden behind a fence, and that anyone can build any workflows for free is incredible because we create advocates and champions just through our free product. But then if you want to solve business use cases with our amazing pro features, or build with larger teams through our enterprise plans with in depth white glove, customer success support, we have those options too. So our product is all about unlocking potential and giving you the most value at any stage and since we’re building out a new category that allows technology to be accessible to anyone, the green field in front of us is massive. So I do think our pricing strategy will continue to evolve and it is something that we’re talking a lot about internally.
Harry Stebbings: If that’s the versatility of the product there and kind of how you think about brand, product itself, the pricing, in terms of the structure and how it impacts the structure, if we start on maybe sales, how do you think maybe you are challenging the traditional sales motion with this category creation almost?
Liat Bycel: Yeah. We don’t think about traditional practices or sales motions, but we think about what is best through the customer lens. So everything we do, every decision we make is focused on how to create the best possible customer experience. We don’t have traditional linear sales process because we have multiple different plates based on diagnosing the needs of each customer. And it’s really about listening to the customer and empowering them to build their solution on Airtable. And that means that we’re not focused on short term revenue wins or convincing a customer to upgrade if they need more time, really digging into the product and understanding that value. Then we’ve also, like I mentioned before, thought about the org design to make sure that we truly drive customer empathy throughout the entire company.
Harry Stebbings: Can I ask what does the org design like specifically with regards to sales, because I guess it’s not the conventional AE/SDR structure, so how does it look?
Liat Bycel: It’s not. We have a customer engagement organization that encompasses all of our customer facing teams. So as a part of this organization we have sales, we have DBRs, we have customer success, we have customer experimentation, and we have customer support. I think truly being on one team, sitting all together, understanding the challenges of each different type of role and of each different type of function has really helped us to uncover potential inefficiencies before they happen and make sure that we are providing the absolute best customer experience.
Harry Stebbings: Totally. No, I do get you, and can I ask, in terms of your role there moving one step along the funnel from sales within engagement, I always think we’re seeing this kind of role of marketers where they create incredible content, but that content is being further pushed into the realm of customer success, with much of it being used for post-sale product engagement. Would you say that transition from marketers being lead gen activists to actual customer success officers in many ways. Do you think that transition is fair and do you see that?
Liat Bycel: Yeah, I think that’s fair and I do see that. We don’t have a cookie cutter mold that we’re selling that will solve all your problems. You tell us what you’re trying to solve and then we help you build the thing that you need. If we are partners to our customers, they become our champions and pass it on. So we are working very closely with our marketing teams on enablement and engagement post-sale, as it’s critically important to our company as we scale.
Harry Stebbings: Now, we spoke about a busy-ness of life before the show, and so I do want to touch on this because I think it’s a super important one that needs more light shone on it. So speaking of changing and challenging roles, can I ask, how do you balance parenthood with an intense leadership role, and how do you think this has maybe impacted how you think about environment building itself?
Liat Bycel: Ah yes. I think about this a lot, and it’s really about trusting your team and being hyper focused on doing great work, not necessarily how late you stay or how many hours you’re showing in the office. At Airtable we’re building a family friendly culture where it’s not frowned upon to go leave to pick up your kids, or work from home if needed because one of your kids is sick and you’re in a childcare bind. It’s certainly a very intense and constantly mentally involving job, but I try to set the right tone and ensure that for the two to three hours per day that I get with my kids, it stays protected whenever I can.
Harry Stebbings: Can I ask, for a founder say, who is wanting to really instigate and activate a culture that does welcome parenthood and family friendly nature, what can they actively do to instigate this? What policies can they put in place? What schemes can they do? What do you think can be done and what would you advise founders who want to create this similar culture?
Liat Bycel: They talk about it. I think it’s really, really important and powerful for founders to talk about the importance of building an inclusive environment, and that is inclusive of folks from multiple different lifestyles that have a lot of different things going on outside of work, like work and life is not so separated as it once was, and I think that founders do set the tone that, Hey, we want to make sure that we are building a very inclusive environment where it’s okay for parents to leave to go pick up their kids and it’s okay to make sure that when schools are off that you should feel like you’re able to do your work in a way that works best for you and your family. I think is a really important tip, and I think that oftentimes when it’s not talked about and it, and it might not be something that they also have going on their life, it’s sometimes hard to show that empathy.
Liat Bycel: But I think that if you’re actually able to talk about it and to make it truly a norm that, Hey, we want to make sure that we are creating the type of culture where it’s high-performing, Yes, and there’s a ton going on and it’s a very, very intense, fast growing environment. But we also recognize what you have going on in your life and we want to respect that. So that means maybe not having any kind of team outing doesn’t always have to happen at night, or maybe planning a team happy hour should happen not the day of, but a few days before so that parents can plan for childcare. Things like that, the little things like that make a huge difference for parents that are trying to balance both.
Harry Stebbings: No, I agree, and I also just really agree with the transparency and open conversation around it. I think that’s a big change that needs to happen. I do want to move into my favorite of any episode though, being the 60 second SaaStr. So I say a short statement and then you hit me with your immediate thoughts. Are you ready to rock and roll?
Liat Bycel: Sure, let’s do it.
Harry Stebbings: Okay. So as we said, time is short and tense. What are the challenges of prioritization?
Liat Bycel: Normally the fire burning the brightest isn’t necessarily the worst fire or most important fire. So for me the challenges of prioritization is knowing what fires to put out right away and what fires are okay to really let burn for a while. I’m constantly asking myself if what I’m spending my time on is driving the highest amount of impact and it’s tough when you’re in hyper-growth trying to upgrade the plane while it’s flying, as they say, everything feels like it’s burning. So being intentional about what priorities can wait is critical.
Harry Stebbings: Can I ask, in terms of determining, for the show for example, I always ask myself if I’m determining whether it’s a priority, I say, will we lose say 5K if this doesn’t get done? And if it’s yes, then I’m going to do it and I’m going to do it fast, and if it’s no, then it’s not the key priority. Do you have questions to determine the prioritization stack?
Liat Bycel: Yeah. I think the questions that I ask myself are, is this something that is really going to change the way that our foundation is built or our organization is going to scale? Is this something that is reversible if we move quickly on it? Is this something that is going to be dire for the business if we don’t do it now, but we wait a quarter or two? And those are the types of questions that I consistently ask myself and the team around me.
Harry Stebbings: I love the contrast there, will we lose 5K and then your incredibly intellectual and thoughtful answer. Moving swiftly on, tell me a moment in your life has changed the way you think and maybe served as an inflection point for you.
Liat Bycel: Yeah, I’d have to say it was when my first baby was born. My entire mindset shifted about what matters most in life, what I’m capable of and what’s really possible. I think having kids puts everything in a new perspective. They teach me something new about myself and push me in ways I didn’t think possible, so I would have to say that.
Harry Stebbings: Tell me what are your strengths and weaknesses? 30 seconds on each.
Liat Bycel: Strengths, I think I listen well, I have positive energy, I bring a lot of passion to what I do. I build trust and strong culture with people I work with. Weaknesses, definitely too stubborn at times. I need to know when to let go, and something else I’m really working on is that I need to delegate more.
Harry Stebbings: I absolutely love that. I’m glad that we’re not alone in the stubbornness element. I do want to finish though. What do you know now that you wish you’d known at the beginning? And it can be at the beginning of your time with Twitter. It can be at the beginning of your time with Airtable, but at the beginning of … ?
Liat Bycel: Yeah. So it’s hard to answer at the beginning of Airtable because I really do feel like I’m just getting started on my journey here and there’s still so much I don’t know, which is what I expected in joining a hyper-growth company. I’m showing up everyday trying to uncover every new rock I can find. So my mind is really focused on figuring out what I don’t know now, not what I wish I had known.
Liat Bycel: However, I would say early in my career, I wish I knew it was okay to make mistakes. I put so much pressure on myself and became a perfectionist at work that I didn’t give myself time and space to breathe into those mistakes so that I could truly learn from them. And now what I’d do differently is putting a spotlight on those mistakes to learn everything I possibly can from them, and share widely and loudly with those around me so that hopefully we can all learn together as a team.
Harry Stebbings: Listen, as we said before the show, I’m probably one of the biggest users. I absolutely love the product, so thank you first for that, and I’ve absolutely loved the conversation and so thank you so much for joining me today.
Liat Bycel: Thank you for having me.
Harry Stebbings: As I said at the beginning, could not be bigger fans of Airtable here, and if you’d like to see more from Liat, you can find her on Twitter at Liat Bycel. Likewise, it’d be great to welcome you behind the scenes here at SaaStr. You can do so on Instagram at HStebbings1996 with two Bs. It would be great to see you there. As always, I cannot thank you enough for your support and it means the world to me.
Jason’s interview with Loren:
Announcer: You’re listening to SaaStr’s podcast, the best in SaaS content to help you scale up and grow faster. Remote and hybrid teams aren’t the future of work, they’re the present. Owl Labs is embracing this revolution and is here to provide remote workers with a virtual seat at the table with the Meeting Owl. Their 360-degree smart video conferencing camera can recognize and highlight any speaker at the table using an array of eight microphones. Check it out for yourself at owllabs.com.
Announcer: Up today, SaaStr CEO Jason Lemkin, and GM of Shopify Plus, Loren Padelford.
Jason Lemkin: It’s Jason Lemkin, not Harry Stebbins on the SaaStr podcast. I’m super excited you’ll get a slightly different perspective. But I’m here with Loren Padelford who is GM of Shopify Plus. I’ve become, if you’ve watched my tweets, or some other posts, I’ve become a super fan of Shopify over the last couple of years. Well before it exploded to a $35 billion market cap recently, which is crazy. I’ll share a story with Loren about that, maybe toward the end, but my first job in software, in internet was in E-commerce and then I fell away from it, but I made a few investments.
Jason Lemkin: I invested in a company Algolia, that does search-as-a-service, and they bet super early on Shopify, before Shopify Plus launched. I didn’t even know that E-commerce was a market, but I started getting these reports that says its hyper growth and it’s Shopify, Shopify. They’re super excited about Shopify Plus. I’m like, “What’s that?” And I invested in another company called Gorgias, which is a contact center on Shopify.
Jason Lemkin: They started there and then boom, Shopify Plus has just exploded for them. They have all these cool brands now, all through Shopify Plus, and I just watched this runaway train happen, maybe even a quarter or two before you could see it in the financials, and to me as a SaaS fan and founder, there are a lot of interesting sub stories, which I want to talk to Loren about because Shopify Plus is the enterprise product for Shopify, but Shopify certainly didn’t start there. They classically started at the bottom of the market.
Jason Lemkin: I want to talk about that, and I also want to talk about Shopify as an incredible example of an ecosystem builder. I became a Shopify super fan when I started to meet with SaaS companies, B2B ones really, that had built relatively large businesses on Shopify, and I saw an app exchange 2.0 that is elegant… When we built back in the day an integration app exchange, it blew people’s minds you could integrate into Salesforce, like enterprise software.
Jason Lemkin: I think what Shopify built was something that’s literally two orders of magnitude easier to integrate with than the direct competition. I think we can all learn about that. I want to talk less, but I am a super fan of this whole story. So Loren, you joined literally to launch this initiative, Shopify and Shopify Plus to take the company upmarket?
Loren Padelford: Yes. I joined in late 2014, and the origin story of Plus is one of just following customers. You’re right, Shopify starts. We want all the entrepreneurs and makers in the world to start [inaudible 00:03:41]. Once in a while one of those entrepreneurs has a really good idea and it gets a lot bigger than anyone anticipated. This was starting to happen on Shopify.
Loren Padelford: And as you well know, software markets are stratified, you’ve got the free stuff, the little bitty costly things, the medium costly things, and the very costly things, and usually as you get big you just keep upgrading until the next stack. Our most successful entrepreneurs started coming to us saying, “This has been great, we started here, we love you, but I guess we’re big now so we’re going to have to go buy some big enterprise software platform and…”
Jason Lemkin: That’s the classic thing founders face. They might have turned out to a Magento or a proprietary system, and Toby and team decided they didn’t want to lose them anymore? Was that sort of the genesis of this?
Loren Padelford: Right. It was like, “Why let the most successful entrepreneurs leave the platform just because they felt like they were now too big for it?” So we said, “Okay, how do we stop that?” So we created Plus. Plus was initially going to be an upgrade path for companies on Shopify, but morphed very rapidly into a mid-market play and then now further up into the enterprise.
Jason Lemkin: Let’s step back for a minute, because a lot of founders go through this, and one, they start to get pulled into larger deals organically, and then once they do, and also they start to see them lose their biggest customers if they’re very successful at the bottom.
Jason Lemkin: But not all founders decide they want to chase those bigger deals because they’re more work and they have different feature requirements and they have different needs and you have to go on jets and you have to visit them, and you have to have conferences and you have to have customer success teams. I think it took Shopify 10 years to launch Plus from launch.
Jason Lemkin: What happened, was it a cultural change? Did Toby wake up one night and say, “I don’t want to lose anyone at a 100 million or 200 million in GMV.”? As near as you can see, what was the cultural change, if there was one, that enabled the company to embrace that?
Loren Padelford: Yeah. Actually, I don’t think it was a cultural change. I think that what happened was, we said, this is just entrepreneurism at another stage of the journey and so if Shopify’s job is to solve for entrepreneurs, then we have to solve this problem just like we have to solve for the problem of people’s starting companies.
Loren Padelford: It was a natural stretching up the market as our customers moved up. This wasn’t a wholesale change, and to your point is we also decided to do this in the most Shopify way. We said, “We’re not flying out to see customers, we’re not going to play the enterprise sales cycle game, we’re not going to play along with this traditional model of everything has to be heavy and hard and long winded. We’re going to do this in a Shopify way,” and we found that the customers actually wanted that model.
Loren Padelford: The first versions of it were all inside sales, all done over the phone, it was fast sale cycles and it just happened to be with larger customers. We didn’t change Shopify. We actually, more accurately, I think changed the mid-market.
Jason Lemkin: Got it. Okay. I guess I should’ve known this, it sounds like even though it’s been five short years, you did stair step this, right? You went to mid-market and then to more serious. Now you’re serving massive global customers today, the top brands. Talk about transitioning that or how you thought about it, how the company thought about it.
Loren Padelford: I think in general, Shopify, our success is based on just continually talking to the customers and saying, “What’s the problem you have and how do we solve that in the most elegant way that allows you to keep going on what you’re trying to do?” So when we created Plus, we had our own customers that were upgrading. They needed more account management, they wanted someone to talk to, they needed help with strategy, they needed a little more technology, we provided that.
Jason Lemkin: Did you add more services? Did you add a more human component to help them?
Loren Padelford: We did. We added more services to it. Like I said, account managers weren’t a thing for Shopify, they are a thing for Plus.
Jason Lemkin: Did you have to drive that change? Did you have to hire the first account managers yourself?
Loren Padelford: Plus was the first account managers, the first solutions engineers, the first sales people, the first launch engineers, the first everything at Shopify in that model.
Jason Lemkin: You came in and had to sit down with Toby and the team and say, “We need to build this whole stack of human beings, even though you have a product that’s substantially self-service for 200,000 customers today.”
Loren Padelford: Exactly, and there was the obvious initial hesitation of like, “That seems like a lot of humans to do a software thing.” [crosstalk 00:08:13]. I was like, “It is.” There’s a benefit of this. We’re going to do it, again, in the Shopify way. This isn’t going to be heavy, but you’re going to need some more services and people, so we started to do that.
Loren Padelford: We just followed customers, so the next group was a bunch of people who were on other platforms who were slightly larger than the ones that were on Shopify, start to migrate, that’s when the product became obvious. It’s like, “Oh, you’re going to have to build the product for these people as well, because while Shopify is amazing, they have slightly different needs.”
Jason Lemkin: So let’s step back, because we all go through this. Looking back, what were a couple feature gaps that you had to solve, four or five years ago, to make that journey, to accelerate that journey?
Loren Padelford: Yeah. I think you look at it and say, “If I’m a store that’s doing hundreds of millions of dollars a year in revenue versus a store that’s maybe doing $10,000 a year in revenue.” You have a scale thing. The volume of throughput going through that store, so you had to upgrade how heavy can the checkout get. You had to have user management, so suddenly there’s more than one person that works at–
Jason Lemkin: Hierarchies are something we all forget to architect properly when we start ain SMBs, right? That can be a big project sometimes.
Loren Padelford: It’s a huge project. A lot of these projects were huge because it was re-architecting a concept of a business into Shopify versus the concept of a store. That’s been a lot of that managing more than one store at a time. If you wanted to have two stores in a different country, that was two instances of Shopify, that’s just double the work. Building out that function so that you could manage multiple stores, multiple currencies.
Jason Lemkin: Did you have a lot of internal battles getting them to build these type of features? Because in my experience, those are tough. No one told me 10 years ago I had to support four stores in the same org.
Loren Padelford: Yeah. I think we had a lot of conversations around what’s the difference between a big company and a little company, and how does that translate itself into software? What are we going to have to build on top of Shopify to make this valuable and scalable to a larger company? To be truthful, a lot of it was also, “Why should we do that? Aren’t there a hundred million entrepreneurs in the world? Shouldn’t we just…”
Jason Lemkin: That’s the story I hear again and again. Why should we do this, Loren? We already have 200,000 customers at Shopify. We have 4% of the market. Why should we build this stupid… Why do we have to do this? It’s going to take away from our core. We’ve got to build these really low end features that everybody needs.
Loren Padelford: This is where our approach and sticking to who we are culturally really came in. I said from the beginning, we should not build a replicant of SAP. This isn’t about trying to build a new enterprise software platform. That’s a bad strategy. Those things are all going to die anyways, so let’s do to the mid market and the enterprise what Shopify did to everyone else. Let’s do this in a way that’s incremental so that we don’t recreate every wheel.
Loren Padelford: Shopify was already so big and powerful and feature-rich that it actually satisfied 80% of what the mid-market wanted, out of the box, but no one knew it existed because Shopify was for maker, Shopify was for very small companies, so mid-market just wasn’t aware it existed. So you were really building around the edges, you were building a feature set that were on access control and stuff like that versus building core functionality that Shopify already had.
Loren Padelford: You really didn’t have this either/or scenario. You could really stretch Shopify’s platform up into this next group of customers and give them a pathway to a future platform versus having to sit on these legacy applications.
Jason Lemkin: Let’s just talk about that for one second because that’s an interesting journey a lot of us go through. When you launched Shopify Plus, one it drives a set of new features and functionality like hierarchies and multiple stores that bigger customers need, but it also helped drive awareness that this functionality existed.
Jason Lemkin: As entrepreneurs, as we all go up market, we’re like, “Should we have an enterprise edition, a global edition, a Plus, a matrix?” And it’s interesting that even Shopify needed to do this, so it was a marketing initiative as well as a product initiative.
Loren Padelford: Yeah, it was almost marketing first and then product second, which was very backwards for Shopify, who is usually product first and marketing second. This was awareness thing, so Shopify Plus has its own brand, its own website, its own… We go to shows on our own.
Jason Lemkin: Yes. You have your own booths at all these events, right?
Loren Padelford: Yeah, so we separated that to create this separation in customers’ minds so they’re like, “There is a version of Shopify that was designed for us, the bigger companies.”
Jason Lemkin: Yeah. I was at Shop Talk in Vegas. There were 40 reps in the booth. It felt like enterprise 2.0. I could talk about my challenges, my issues, talk to a solution architect, it was pretty neat.
Loren Padelford: Exactly. That was us saying, “Hey, we have this thing that we never intended to build for this market, but we built it and it’s so big for the now 800,000 customers that use Shopify. It’s so big that it was naturally at the scale of the enterprise by accident.” No one knew that.
Loren Padelford: The first calls with customers were fascinating. You’d call these big companies and they’d say, “But you’re Shopify. Aren’t you for the little guys?” We’d go, “Yes, we are.” They’re like, “You can’t handle our volume.” I was like, “Well, what’s your volume now?” “A hundred million dollars.” I was like, “Yeah. Last year Shopify did 14 billion.” They were like, “What? Who are you? What is Shopify?” You went into this new re-education process of, “I had no idea what that was.” That opened the door. That was the aha moment for a lot of companies where they were like, “Holy crap, this thing might be real.”
Jason Lemkin: When did that transition from a lot of the discussions being with customers that are growing with you to new customers that hadn’t grown up on Shopify. When did that transition happen?
Loren Padelford: The first year of Plus, we were about 60/40 upgrades to new business. It moved fast. The second year it tipped over and it was now new business to upgrades, and it’s been like that ever since. We’re about 60/40, 65/35 new to upgrades as we go.
Loren Padelford: Partially, Shopify was also growing. Its profile was going up at the same time, there was a lot more press around Shopify so people started asking the, “Who is this Shopify company?” question, and so we got a lot more inbound from bigger companies being, “Who is this?” We also started to land more high profile customers.
Loren Padelford: The first really noticeable one was when we landed the Red Bull customer. Everyone was like, “What do you mean Red Bull uses Shopify? That’s impossible. Red Bull is a real company.” And we were like, “Yeah. Welcome to Shopify Plus.” Then everyone was like, “Oh, crap.” And then the phones just started to go and the team started to…
Jason Lemkin: Did that help catalyze the company to get an iconic brand like that at scale? Did it wake everybody up on this direction?
Loren Padelford: Totally. We love brands, we love brand stories. I mean, we are here to help entrepreneurs and to create more voices for Shopify. This brand you could tell your family about that everybody would know was such an interesting thing because most of Shopify’s customers, until then, were brands that you might know, but it wasn’t household names and then suddenly we had household names and everyone was like, “Maybe this is a thing, we should maybe do this. Really do this.”
Loren Padelford: That kind of accelerated the whole pace and then that move led to the next move, which is, as soon as you get a couple of high profile kind of mid-market players, then suddenly all the actual enterprise players also start knocking on the door and saying, “What is it you’re doing with them and can you extend it even further up to us?” That’s where we find ourselves kind of now.
Jason Lemkin: Yep. I want you to represent Shopify, but also help us understand at a meta level. Now that you’re going bigger and bigger, you’re competing with Salesforces and Adobe. You didn’t even know you were going to compete with Adobe until a year ago. They are very different companies. What are the pot shots they are taking at you in the sales process and how are you learning from that and deflecting it? Because they do have a lot of experience with big customers, right?
Jason Lemkin: If you dropped 20 million a year with Salesforce, they will solve your problem. It may take two years, but they will solve your problem. How do you deal in that competitive landscape and what are they saying about you that may be right or wrong?
Loren Padelford: Yeah. I think that our approach is always to just… It’s the, “When they go low, we go high.” It’s call it out and be like, “We aren’t them. We aren’t trying to be them, we’re not trying to compare ourselves to them, this isn’t a fair comparison because we’re in a different world. They live in the stone ages, we live in the future.” Our approach is, they’re trying to commoditize commerce at this point and in a lot of cases, give it away, as like, “I have one of those,” but what you really want is CRM or what you really want is ERP or what you really want is this other thing. And by the way, I’ll give you the commerce thing. To me, that’s just a tell.
Loren Padelford: It’s like, “Yeah. You’re going to realize two realities. One is commerce is central to customer’s lives, so this isn’t a throw away product, this isn’t an also ran, they want the best sharpest tool in the tool box. Two, I have one of everything used to be an amazing strategy, but it’s also a potential flaw and something you can exploit.”
Loren Padelford: I think the third part is, and this is what we’ve also said is, “Look, if you’re growing, a high growth, hyper valued DTC, you’re doing it on Shopify.” So my answer is always the bifurcation. 100% the traditional enterprise you should totally buy one of those platforms, but have you noticed where all the new ones are and all the fast growing innovative ones are? They’re over here. I don’t know what to tell you about that.
Loren Padelford: It’s using their own enterprisey sales pitch against them. And being like, “No, you should totally enterprise, it’s a thing. I don’t know why you’d want to be one, but you should totally go buy that thing if you want to be an enterprise.” It’s fascinating how few of the digitally native or DTCs, or even the traditional retailers who are rebranding themselves, how few of them want to be enterprise companies.
Loren Padelford: They just want to be brands. They want to recreate shopping, they don’t want to have giant IT orgs and all this [inaudible 00:19:09]. Their value set doesn’t line up well with those traditional platforms, so it creates this us or them, new world/old world, and they just fall into this trap constantly and it’s wonderful to watch.
Jason Lemkin: I bet there’s a bit, with some of the customers, there’s a bit of panic with what is happening in E-commerce, right? There’s a bit of fear that, “My stores are shutting down, the world’s changing.” Do you provide some guidance to these big customers on how not to become a dinosaur? Do they look to Shopify Plus to be a leader because I think when I was in Shop Talk in Vegas, this terrification that E-commerce was everywhere and all the talks were worried, “We’re worried we’re going to be destroyed by Amazon, Walmart, and everybody else and we’ll be out of business.”
Jason Lemkin: Shopify in some ways, from a Wall Street perspective, it’s like an anti-Amazon, but from a customer perspective it’s very different. Can you help me not to become a dinosaur? I don’t want SAP because I don’t want to be dinosaured. What do you do to help combat this ossification?
Loren Padelford: I think for us it’s a lot of the discussions with our customers is, “We’re your partner and you should not spend tens of millions or hundreds of millions of dollars on your E-commerce platform. That’s the way you’re going to die. Stop that. Spend that money on brand and customer experience because that’s the way you’re competing with anybody, let alone the Amazons of the world.”
Loren Padelford: I think what we’re suggesting to them is the days of spending your money in the IT stack are over, you can’t survive this way. The consumers are too fickle, they move too fast. You have to spend it now. The money needs to transfer from the CIO’s budget to the CMO’s budget. So the CMO can go get the customers in a completely different way than that’s ever been possible. What we are is the facilitator of that. We move faster. We implement in 90 days. I’m not partnered with any of the big five consulting firms for implementation because you don’t need that if you’re going in 90 days.
Jason Lemkin: We’ll talk in 2023 when they all want to partner with you, but today I’m with you.
Loren Padelford: Yeah. What we’re seeing is your best advantage is to stop acting like the IT stack is how you win.
Jason Lemkin: Yeah. The question on that, just because it is so interesting that you see that budget change, do you have a sense of whose budget you’re coming out of? Are you really coming out of a CMO’s budget, where four years ago it was CIO budget of the IT department. Do you see that happening consistently?
Loren Padelford: Yeah. You see the rise of chief digital officers, chief customer officers, CMOs, and that’s where the CEOs are spending more of their time because this is a customer acquisition problem more than it is a customer management problem. That’s the marketing budget, that’s the merchandising budget. First forays for us are almost always the CMOs and chief digitals. The CIOs tend to… The innovative ones are all in. They’re like, “Yeah, man, let’s redesign this stack.” But some of them are adversarial.
Jason Lemkin: How do you deal with that?
Loren Padelford: They’re usually the ones trying to get someone to buy one of the big five software companies and I’m usually just sitting there, going, “I don’t know what to tell you.” Again, the way I deal with it is, “What do you want to be? Do you want to move fast and be nimble and do customer experience or do you want to own servers and manage patches and be an IT company? Are you a brand or an IT company? Because if you’re a brand, this game is over. It’s done now and you need to shift. If you want to be an IT company, amazing, good luck with that. It’s hard to be a software company.”
Loren Padelford: Usually that’s the end. People [inaudible 00:22:54], “I don’t want to be an IT company.” Cool. If you had, $1 would you spend it on customer experience or servers? If the answer is servers, I’m out.
Jason Lemkin: You are out.
Loren Padelford: Right?
Jason Lemkin: You just end the conversation. In 2019, with your customers, if the CIO or the IT, if they’re opposed and the CMO really wants Shopify, he or she sees the world changing, I want to be up in 90 days, I want to be agile, can the CMO win that debate in 2019? How often can she win when you don’t have a CIO that’s about innovation? What are the odds today in 2019?
Loren Padelford: Yeah. A lot more than they used to be, but this is also I think ,the unfair advantage of Shopify. Shopify from a budgeting perspective is materially different than an enterprise application. This is not capitally allocated. No one has ever capitally allocated budget for Shopify. It’s a credit card. They’re running it all on their credit cards. So CMOs can just buy it without even talking to anybody.
Jason Lemkin: [crosstalk 00:23:59]. Yes. They might get in trouble, I’m learning. It changes every year how these fights happen, right?
Loren Padelford: Yeah. I can try stuff, I can experiment, I can sneak it in the back door sometimes. Now, in the more sophisticated bigger orgs where you have this more structured buying process, the short answer is yes, the CMOs can win because right now the CMOs tend to have as much attention from the CEOs as the CIOs do. Because it’s where’s our brand? We’re in a rebranding process, we’re in a customer acquisition war, and so they’re spending just as much money on that as they are on IT.
Loren Padelford: To be fair to our friends in the CIO’s office, look, there’s a lot of CIOs who have also just been like, “Hey, I don’t want to run servers anymore. If I can enable the company with better technology, that’s actually my job. My job isn’t to own thousands of people in a server farm somewhere. My job is to make technology leverage the company.” And so those ones get on board in a hurry and are the first… We get those calls too from CIOs who are like, “We’ve got to get all this legacy crap out of here.”
Jason Lemkin: The best ones are the ones who want to bring a couple of new projects a year and bring change in the organization, right?
Loren Padelford: Well, and see it as a lever. We see this happen all the time. People select Shopify and it makes their careers.
Jason Lemkin: It does.
Loren Padelford: They can leverage down the cost and leverage up the impact and the company is like, “This is amazing. We saved a bunch of money, got way more capabilities, moved a hell of a lot faster. Who made this choice?” And they point at Susie, and suddenly Susie’s in charge of stuff.
Jason Lemkin: Yeah. Let’s talk about that for a second because I think founders don’t get this. Founders see a lead come in, a Red Bull, a Nike, and it’s elite. It’s a great one, but the first time I saw this as a SaaS CEO was when we closed Qualcomm very early, and my stakeholder sent the Qualcomm newsletter out and his picture was in it, “We brought EchoSign in and I’m a hero.” He was on the second page of the Qualcomm newsletter and that was the big thing he did in three years. We forget that, one, there can be a lot of career risk in bigger deals, right?
Loren Padelford: It can be.
Jason Lemkin: But two, if you find someone that believes in you, this may be the most important decision they make in three years in terms of internal visibility if it’s a hit, right? If this Shopify store works, versus this old piece of junk, whatever thing they’re trying to do, they don’t do this every month, do they? It’s every couple of years, so you’ve got to quadruple down on them and they become your loyalist for a decade, don’t they?
Loren Padelford: That’s exactly right. This is what we lever towards. We have companies call us all the time who are like, “I’ll give you $20 million. Just do this thing.” Our answer is always, “No. We don’t custom build you software. We’re looking for customers who are going to be wildly successful because when they’re successful, the leverage impact of that for us is huge and for our users.” This is what happens. You have these people making their companies, in a lot of cases, they’re betting their companies on Shopify because we’re in such a unique position. There aren’t very many platforms that if you turn them off, you turn off the company.
Jason Lemkin: There’s more than you think. As founders, we forget also it’s a real important point what it means to be mission critical. You have a huge obligation to your customer, right? You go down for five minutes, the switch boards are going to light up. It doesn’t matter even if it’s AWS’s fault or whoever’s fault, it doesn’t matter, you’re mission critical.
Loren Padelford: That’s true. Being mission critical on the other side, when you’re successful, people are just raving about it. That’s our ecosystem in its totality, it’s raging fans of what we’ve been able to help people build and do and leverage, and I think that’s our key. I’m looking for customer success opportunities, not revenue. If you find all the successful companies, the revenue follows them. It’s being able to wait slightly longer for the money than feels comfortable.
Jason Lemkin: How many roughly, if it hasn’t been disclosed don’t tell me, but roughly how many Shopify Plus customers are there today?
Loren Padelford: Yeah. The last public number was 5300.
Jason Lemkin: 5300. Okay. You’ve been doing it five years. Do you have a sense, with this great customer experience that you have, how much of your new Shopify Plus comes from word of mouth, folks telling their friends, leaving, going to another brand? Do you have that second order engine really humming at this point?
Loren Padelford: Yeah. There is a big network effect off of Shopify. That flywheel is both from Shopify itself, it’s the aspirational brand now, people want to be on Plus because it means you’re growing and you’re big. The bigger companies are definitely word of mouth in a lot of ways. They’re all talking to each other now. They’re all going to the same conferences and they’re like, “What are you running?” They’re finally in rooms where people are like, “We run Shopify.” It’s validated. It’s not the bleeding edge and there’s enough Fortune 50 companies on Shopify that they’re like, “Yeah, great. We can move to this now.” So that barrier of risk is coming down.
Jason Lemkin: How long do you think that took to have that moment where Shopify Plus didn’t feel risky anymore?
Loren Padelford: We’re five years in, it was a good three, three and a half years.
Jason Lemkin: That’s my guess for the average start up. For Shopify, it’s true, too.
Loren Padelford: Yeah. I mean, even once you had the first kind of marquee brands that everyone knew, everyone would discount them and be like, “But they were the first, you must’ve given them something.”
Jason Lemkin: “They’re outliers.”
Loren Padelford: Yeah. You needed a hundred of them and then everyone was like, “Oh, so maybe this is a thing. It’s not a random thing, you have too many customers at that scale.” Now, our largest customers are over a billion dollars a year in their online stores. Once you’re in this scale, it’s hard for people to argue you can’t do it. It brings in the next wave of people who are, “Okay, I’m bored trying to fight this wave. We’ll come, too.”
Jason Lemkin: But even Shopify needed those 100 logos to leave the early adopter phase, so to speak, for Plus. It’s the same whether you’re Shopify or new start up, you need that 100, because 100 is a 1000.
Loren Padelford: Yeah. I think in Shopify’s case and Plus’ case, we actually had… on one side, we had a lot of advantages coming from Shopify, but that was also challenging because Shopify’s brand was so strong in the entrepreneurial space you got discounted so fast out of conversations because people are like, “Yeah, yeah, yeah. For the small guys. We’re not talking to Shopify, they’re for little guys.”
Loren Padelford: I know for a fact we were not included in hundreds of evaluations early on because of the Shopify effect. Too small, for little guys, not us. I know that because they’ve come back three, four years later, and they’re like, “Yeah, we didn’t even know you existed two years ago when we chose this other thing, but now we’re here so let’s move on.”
Jason Lemkin: I want to make sure we have time to talk about ecosystems before we run out of time, but that three to four year thing is interesting because you’re five years into Shopify Plus, right? If you don’t win a customer, what’s your cycle? Do you have another shot in three to four years? And how do you think about going long and how do you think about retaining those longer term relationships if they’re not ready today? Because you don’t get a chance in another six months, usually.
Loren Padelford: It’s true. Retail happens to be in a fast cycle, because it’s moving so quickly so people are constantly looking. But minimum time until someone chooses another platform is usually two and half, three years because it takes so much effort to do. We are definitely long-term thinkers in that we’re optimizing for the experience, even if you don’t select us or even if you leave us. Customers do leave us. We optimize for leaving. “Okay, you want to leave, you can leave.”
Jason Lemkin: Yeah. No ten-year contracts that you’re bound and you have to pay, even if you hate the product? None of that behavior?
Loren Padelford: We have a 12-month initial contract, then that goes into monthly and that’s it. [crosstalk 00:31:48].
Jason Lemkin: You know this is my passion topic. Let’s talk about that. You’re enterprise. If they’re not happy for some reason, you want them to go and then come back later. You don’t want them angry that they’re stuck with a platform that doesn’t work with them today, do you?
Loren Padelford: No, because long-term you need happy customers, not contracted customers. If they’re only here because they have a contract, we’ve done something wrong.
Jason Lemkin: Yeah. I’m going to put that up on the Twitter and blog post a hundred times. That is the answer. You want customers for life or at least for decades, and if you’re not a fit for them and you have the NPS and the brand that Shopify has, you’re going to get another chance. You’re going to get into that next deal. You will see them again down the road if you treat them well, won’t you?
Loren Padelford: Yes. Toby has said many times, “We’re trying to build a hundred year company.” And so you need customers for a hundred years. If you’re not ready today, it’s okay. I’m here for a hundred years, you come back when you’re ready. We’ll still be here.
Loren Padelford: That’s potentially hard short-term on financials, but I’ll tell you the truth, it’s not. The snowball effect just works. Customers love that and then when they come back you’re not selling them anything, they came back. They just come back and sign up and move on. Your second sales cycle is your own base.
Jason Lemkin: All right. We’re going to have to talk about hundred year customers at SaaStr Annual, that’s the right answer. We’re ready. If generational companies should think in terms of hundred year customer relationships. It’s kooky. It’s crazy because where were we a hundred years ago? Did we have airplanes? I guess we did. But we’re in the third decade of a lot of SaaS companies. The Mailchimps, the Salesforces, they’re getting into their 20s now, their third decade, and they’re just getting going. Why can’t you plan for at least 40 or 50 years?
Loren Padelford: Yeah. Optimize for the long-term. It feels like it’s going to be worse, but it’s always better. I’ve never seen it not work out.
Jason Lemkin: Me neither. All right. Last one because I want to make sure this can all fit in one podcast, but this is a great conversation. Let’s talk about ecosystems. I don’t actually know the difference between Shopify and Shopify Plus partners. I am ignorant there, but I know for the core Shopify customer, having an open ecosystem was absolutely disruptive, right?
Jason Lemkin: You had products like Magento, which had a lot of early traction, but were very difficult to integrate into. There’s multiple versions, you’ve got hybrid open source, there’s 11 versions, early other things like WooCommerce and other things, they had cool functionality, but how do you… And low-end things, even if you’re trying to do something on Square or Squarespace, or something, it’s very hard to plug in.
Jason Lemkin: And Shopify, I think intentionally, built something that was not only open, but was dramatically more open than it’s competition, right? What are the learnings, beyond the trite ones, and how does that play in the enterprise? Does the enterprise care enough that you have simple re-targeting products at the low-end? How does this play on the bigger customers, this ecosystem?
Loren Padelford: Yeah. It was definitely intentional. It’s probably one of the smartest things that the company did from day one. When Toby was building it early on, was building it with the open API infrastructure so that people could just see the API, it was documented, they could grab them and run off with them and build extensions. That was a fundamental understanding that no platform exists in isolation. We exist in an ecosystem of solutions used by a customer.
Loren Padelford: If we wanted to solve problems, we had to solve them way faster than we could build on our own because the problem set was so large, so why not incorporate and bring to the table everyone else trying to solve problems as well and just say, “Let’s solve this as an ecosystem.”
Loren Padelford: We ran so much faster, we had the net effect of dozens, then hundreds, then thousands of software companies building with us into this and their own word of mouth and their own fly wheels also contributing, and so it’s just been this effect over and over and over as we’ve built this out, and it’s a huge reason why we’ve been able to grow so quickly. It wasn’t just us, we had a giant flotilla of partners out there in the world just sucking up problem sets and solving them.
Jason Lemkin: Yep. How does that change as you go more enterprise? Do folks use as many third party vendors and plug ins, or do they use less, is it similar? What’s different?
Loren Padelford: Yeah. They use a lot. I actually think you could describe Plus as maybe the fastest integration platform in the world. Because at the enterprise, you can show up and use relatively high-powered solutions very quickly. This will take you minutes to integrate your CRM into Shopify versus decades, or however long it takes, to do some of these things.
Loren Padelford: This has become a huge advantage. On one side, it is filling gaps in our own product, which we need to fill, that’s true. But on the other side, it’s allowing customers to stand up [inaudible 00:36:40] systems very quickly, which is why we can go from zero to full, our average implementation is 90 days. These are enterprise stacks getting launched in 90 days.
Jason Lemkin: How many, if you had to just guess, when you do an enterprise implementation, how many Shopify, how many partners will be in a deployment? How many partner applications will be deployed?
Loren Padelford: Yeah. It ranges from low single digits to a dozen or two.
Jason Lemkin: One question for founders, because they don’t get it. Everyone wants to be the partner with Shopify with its scale today, right? How do you learn, because it’s great that they use partners, but if you bring them in to one of your top accounts and they fail the customer, that is bad, isn’t it? It’s really bad, right? So there are some cons here, they are minimal but they are cons that you don’t run the software.
Jason Lemkin: How do you figure out which partners to trust, how do you learn this? Is it anecdotal? Because the last thing you want to do is win the Red Bull or the other hundred and then have this third party thing be the thing that just breaks that great relationship. How do you learn this at Shopify Plus’ scale?
Loren Padelford: There’s a few ways. One is we have a team dedicated to this. Our platform team and app team is, all they do is work with app developers on ensuring they built things the right way. The other ways are customers. With 800,000 customers consuming apps on a regular basis, you get rapid product information.
Jason Lemkin: You have a lot of data.
Loren Padelford: Yeah, we’ve a lot of data. It’s like, who loves them, they get ranked in our app store, our customers talk to us about them. As Plus has grown, we’ve learned a lot from our own customers. They tell us information, “This one works better than that one.” They’re constantly trying new things and experimenting so we get a lot of feedback on this, but we’re always looking to develop that relationship, increase that trust battery because you’re right, they do look at us. They look at the platform and say, “Hey, they’re your apps, it’s your ecosystem. We need to trust you that you’re managing them,” so we have to extend our own trust to our ecosystem so we’re always looking for ways to help that process along.
Jason Lemkin: One last question on that, and then I want to ask you one final question, because we’re over. Let’s say I’m doing a million or two million on the Shopify ecosystem, particularly on Shopify Plus. I’ve got a million or two million there, so I’m not nothing, but I don’t have everyone’s attention. Just to help founders, what should I do? Should I continue to make customers happy, should I fly to Toronto, should I go to your events, should I send Loren a hundred emails every week? I’m at a million or two. I’m not breakout, but this is important to me. Shopify Plus is pulling me with it. What should do you in general for Shopify, and then it’s a lesson for any founder in a similar position?
Loren Padelford: The first answer is always solve the problem for the customer the best way. You’re a product company so we pay most attention to product. Is your product good? Are you solving the problems? Do the customers agree you’ve solved the problems? You could send us all a million emails, the first questions we will ask is, do you solve the problem the customer wants and do they agree you’ve solved that problem?
Loren Padelford: If you can’t answer yes, the rest of it is irrelevant, because for us, that’s how we’ve grown, that’s what we focus on. And so anyone that’s going to be successful in our ecosystem is also focused on that same thing.
Jason Lemkin: Got it, got it. All right. I would assume if you got to a couple million of revenue you’re doing something right. That sounds small for Shopify, but for a start up, if I’ve done that in Shopify that’s a real business.
Loren Padelford: There are app developers in our ecosystem that all they do is build Shopify apps and they are tens of millions of dollars with funding rounds, this is getting big.
Jason Lemkin: I would bet with zero data there’s a hundred folks doing a million to 50 million on the Shopify ecosystem alone. A hundred, right? But if I’m one of those hundred, and then I want to hit that last question, should I do anything special? Should I hire 11 business development people or should I just make the customers happy and Shopify Plus will find me and it will work itself out?
Loren Padelford: Yeah. Our experience would suggest you keep building the best product, the customers will find the best products. We will find those products, too.
Jason Lemkin: Okay. Don’t over index on magical partnerships and business development, just close customers and the synergies will happen.
Loren Padelford: Solve customer problems and we will find you.
Jason Lemkin: Okay, so schmoozing is not the most important thing on the list of partnering with Shopify Plus. You laugh, but we know from our careers that it does make a difference. In traditional enterprise, being a good partner is important and sometimes schmoozing is as important in some cases as the quality of the software itself, right?
Loren Padelford: I’ve personally had the encounters where we have potential partners who are really excellent schmoozers, they’re really good at it, and they don’t end up being our partners because as soon as we’re done with the small talk, we’re like, “Show us the product,” and the product is weak and it doesn’t solve problems and the customers hate them. We’re like, “You’re out. That’s not what we optimize for.”
Jason Lemkin: Last question for fun, and then if you want to add anything at the end, let me know. We had Byron Deeter from Bessemer at our holiday party last year, it’s one of my favorite talks, I’ve got to promote it more, and we were talking about the Bessemer Venture, Bessemer’s largest investor in Shopify, we were talking about their investment memo. And he said it was one of the only deals at Bessemer where every single partner wanted to do it.
Jason Lemkin: They loved the team, they loved everything about Shopify, literally no objections. The only objection when they invested was that this sort of store thing for SMB was so small, they projected the maximum exit would be seven hundred million. They all said, “We’re not going to make enough money on this deal, but we love this team so much we’re going to make an exception even though we don’t think it breaks our model.”
Jason Lemkin: There’s a cloud story in that, an E-commerce story in that. Did you think when you joined it would be a $35 billion company today? I know you were bullish or you wouldn’t take it. Did you think it’d be… I mean, the cloud is crazy. Did you think this would be a $35 billion company today?
Loren Padelford: The short answer is no. I’d love to say, “Of course, everyone saw it coming.” The truth is this is a tidal wave. I had a customer say, “We’ll weather this storm.” And I was like, “This is not a storm.”
Jason Lemkin: It is a tidal wave, isn’t it?
Loren Padelford: It is a fundamental restructuring of an industry, and I think we are very fortunate. We have great customers and great partners. Yeah. This ride has been amazing. These last five years have gone by in a blur. Now, sitting and looking back, now I realize our former CFO, Russ, made a crack on a business news interview.
Loren Padelford: There were rumors about Google buying us and he joked backed, he was like, “That’s interesting.” He goes, “I guess someday we’ll buy Google.” We all laughed, and then we all suddenly weren’t laughing. We were like, “Maybe someday we’ll buy Google.” I think now I look forward and… I really do think about this as a generational company, a material global company, and we’re very early.
Jason Lemkin: We are early. It’s crazy. Who knew even seven years, even five years ago? We didn’t quite know, it’s a tidal wave. All right. Loren, thank you. This was incredible. I really appreciate your time and I learned a lot. Let me know if I can help in any way or whatever else we can do to help you and Shopify Plus.
Loren Padelford: Jason, thanks very much. This has been a lot of fun. I appreciate it. Right back at you.
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