Ep #402: Mårten Mickos, CEO of HackerOne, explains their innovative approach of packaging customer value derived from a variety of activities into an annually recurring subscription offering that delivers outstanding value to customers while simplifying the buying process and the customer journey.

This episode is an excerpt of Mårten’s session at SaaStr @ Home 2020. You can view the full video here.

 

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Jason Lemkin
SaaStr
Mårten Mickos

Transcript:

Announcer:

In today’s SaaStr insider episode, Marten Mickos, CEO at HackerOne shows the innovative approach of packaging customer value, and how your business can use their model to build elegant and powerful customer offerings.

Marten Mickos:

Good morning, good afternoon, good evening, everybody at home or wherever you are, online or offline. My name is Marten Mickos. I’m the CEO of HackerOne. I was previously the CEO of MySQL, an open source product you may know. And I’m here to talk about SaaS products and how they can be delivered, and how you build a sustainable business for your own SaaS company as you serve customers. Because the packaging and pricing and thinking of the product will radically influence how successful you can be. So that’s what the session is about today.

Marten Mickos:

We heard here that the cloud business has a combined market cap already of over a trillion dollars. So the whole world of software as a service and cloud has just exploded and will continue to grow enormously. But we’re still a little bit grappling with what it means and how to define it. And if we look at the specifics of the word SaaS, software as a service. In a way, it’s old fashioned to think that it is software that we are delivering. Software is just one thing of all the value you need to deliver to a customer. And saying, as a service is also in a way weird because it’s not about delivering a service, it’s all about delivering value and results to your customer. And service many times means it’s human beings doing it. So how does this even work with software as a service.

Marten Mickos:

So we’re look into the definition of what this can mean and how you build value from your company that you can sell to another company so that they become tangible results for the customer. And so that the customer will agree to pay you a recurring subscription fee, which is the power of the SaaS model, that you get a recurring revenue stream that hopefully will grow over the years as the customers will consume more. So in return for delivering this unparalleled value to customers, they give you a fixed recurring revenue stream that you can count on, makes it easy for everybody. But it’s more difficult than just setting up a website and selling subscriptions.

Marten Mickos:

Looking at how this has evolved over the years, back in the 1990s, if anybody remembers such a time, we used to sell software as physical packages in boxes with diskettes and media. That was the predominant delivery and packaging model back then. In the 2000s, we turn into software licenses where we sold support contracts on top of them. And 10 years later, we got into software as a service and we said software shouldn’t be delivered to customers, let’s deliver it as a service with the results that are involved. We are in yet another change here, where what we deliver to a customer is much more than software automation. And the word SaaS is in a way outdated because we now are learning to deliver unparalleled customer value that we deliver digitally. And in return the customer will give us a revenue stream that is recurring, ideally growing, and where business results are accomplished.

Marten Mickos:

So in a way, it is a simple that customers just care about getting their job done. They don’t necessarily ask for software. They don’t necessarily ask for your vendor. They don’t necessarily want many vendors, but they want to do is get something done that they must get done. And as a SaaS vendor, your job is figuring out what that job is and delivering it as completely and conveniently as possible to the customer. And if you don’t do that, if you’re too much focused on your own software platform or your own revenue stream, you will not do a perfect job in serving the customers and you won’t get the business that you are hoping to get. So as a vendor, you have all the complexity on your side. And your job is to turn it into something simple and convenient for the customer, something the customer is ready to pay a premium for.

Marten Mickos:

And thinking about this, you have to go outside of the setting of just software and figure out all the hurdles to getting the job done and thinking of how you can package it and deliver it in a way that customers can easily consume. In a way, what we are seeing here is that, as many people have said, software is eating the world. Marc Andreessen coined that term, maybe 10 years ago, software is eating the world, meaning software is penetrating everything in the world. It also means that software is not the distinguishing factor anymore. Software is not the product of itself, software is embedded in everything we have. So when you’re cooking something for your customer, you’re cooking a wonderful dish with a wonderful recipe for your customer. This is your product, there are many things that go into it. And some of them are software, but some are not. So you do automation by software, you have a SaaS platform that automates work and it’s much easier, customer is happy, you store the data, customer is happy.

Marten Mickos:

But you add to that customer service that is probably provided by human beings, maybe by human beings augmented by automation, ML, AI and so on. You most likely are linking to external sources of data, external software packages that you embed in the product and turn into what you’re delivering to the customers. You can have a database and a set of data from which insights are derived that cannot be called automation, is not customer service, but there’re insights benchmarking analytics that contribute to providing the value to the customer and giving the customers the benefit that they are really looking for. And there could be other work, there could be work done by the customers of the customers that’s included. It could be work done by suppliers.

Marten Mickos:

And if you are a product manager, or if you are in charge of go-to-market, or sales, or you’re the CEO of the company, I encourage you to think about the whole product that you need to deliver to the customer, and think about the entire job that needs to get done. And if you can unshackle the thinking from just software as a service, I think it is value delivered digitally. And that is what your business is about, you will be able to construct packaging that is much more fulfilling for the customer, much more convenient to consume, and much more powerful in delivering the value that you’re trying to deliver, delivering the results. And if your customer then is not sure whether the value was generated by an AI bot or software or humans or third parties, then that’s a good point.

Marten Mickos:

That’s a great achievement if the customer doesn’t need to know and doesn’t have to know how the cooking was made. As long as that there is a product that is delivered has everything that’s needed, that is what you’re interested in. And the customer will in return be ready to pay a subscription fee, which is probably higher than otherwise because there’s so much value embedded in the delivery. There’s so many other things that the customer doesn’t have to worry about, other products that they may not have to buy because you’re delivering something that solves their problem completely.

Marten Mickos:

You use a lot of software in doing it but it’s not only software. Software has penetrated everything and everything has penetrated software. So you need to think more broadly about the whole product, what it contains, what it is built up. It does make product management and innovation and development that refer to our own product roadmap more complex. Because for every piece of value you have to deliver to a customer, you have to think about whether you will build it, buy it, outsource it, integrate it,. whether it comes through an API or not, whether it’s inside your product, outside of your product, whether it’s based on data or not, whether it’s automated or not. A lot of nuance in how it is provided. But that is exactly how your company can differentiate and provide something that no other vendor has been able to produce so far.

Marten Mickos:

If we look at some examples in the industry, companies that some would call SaaS companies, look at Uber or Lyft. What does their product offering consist? Is it the software company? Is it the transportation company? Is it the gig economy? Is it an outsourcing business? Is it a professional services business? What is it really that makes it compelling to you? What is it that solves the problem for the customer? And it turns out, it solves many problems in various innovative ways. And it doesn’t have to be Uber, it can be any company, any two sided marketplace, any company, the gig economy where they combine geo location, they combine statistics, analytics, prediction, mapping. They know their customers and what they prefer, they know their suppliers and when they need to work. They have amazing UI on a mobile phone to show what’s going on in real time so that as a customer you feel like you’re being serviced and you get exactly what you need.

Marten Mickos:

That whole offering consists of many things that are software, data, API, integrations, third party offerings. And even the customers together help make it a better product by using it. And the suppliers together help make it a better product. So it isn’t just one software algorithm, it’s not a patentable thing, it is the entirety that makes the value for the customer. You could similarly ask about Grubhub, is it food? Is it software? Is it delivery? All of those. If you are One Medical, what is the business model? How can it be a subscription business when it’s healthcare? How do you package it such that it for the consumer and the customer becomes easy to use, easy to consume, trustworthy, hassle free, and you know what you’re paying. Predictability of pricing is important. So a buyer will always want to be able to predict how much it will cost. Many SaaS models are based on consumption so it can go up and down. And that’s fine as long as you make sure that customers can predict where it will go based on how they use it and what they are doing.

Marten Mickos:

Similarly, at our company, at HackerOne, you can call us a two-sided marketplace, you can call us a cybersecurity company or SaaS business. You can call us a talent agency for all the ethical hackers in the world. But we’ve had to grapple with the same question. How do you package ethical hacking into something that becomes a subscription offering, where customers will consume it on an ongoing basis and pay a recurring fee? And that is exactly what we’ve done. The core value of HackerOne is to provide you with the best ethical hackers in the world who will look for vulnerabilities in your software and report it to you. That sounds easy. And it’s a straightforward idea.

Marten Mickos:

But to make it a full product that you can deliver to a customer and in return request a recurring fee, you have to automate it with software. You have to make it safe and secure. You have to vet the hackers and make sure they can be trusted. You have to vet the customers and make sure they are doing their work right. You have to keep record of everything. You have to use data to benchmark against others, to measure against others, to set the prices of the bounties. The entirety of the product is much more complex than just the act of performing ethical hacking or just the act of having a software platform that handles the ticketing. It’s much more elaborate than that. And all that complexity is handled by the vendor so that the customer coming to the something like HackerOne will be able to buy a fixed product offering and deploy it very quickly and get results very quickly.

Marten Mickos:

Given that we are a two-sided marketplace, we also do it with the hackers trying to make it as effortless for them to participate and produce. So what customers are looking for, it’s so simple, it has always been like this, they look for convenience and predictability of cost. And we can say the million times and yet there are so many companies who do not focus on this. Many companies try to make something that’s very advanced or something that is correct, or something that’s exciting, or something that does something the founder wanted to do. Those are all good intentions, but if you want to build a SaaS business that truly scales and can capture a large part of the market, you have to address the question of convenience. Convenience is important because there’s nothing we have so much in short supply in the world as time.

Marten Mickos:

There’s a lot of money, there’s a lot of resources, there’s a lot of computers, there’s a lot of many things, we don’t have a lot of time. So if you are a customer, by definition, you’re overworked, you have too much on your plate. There’s too much to coordinate, too much to check, too much to buy, too much to deliver. So what every customer is looking for, whether they tell you so or not, is convenience. Something that reduces the complexity for them, something that’s easy to consume, something that delivers the value they need, something that allows them to spend more of their attention span on something else. So taking away the complexity from the customer side and bring it inside your offering, that’s what SaaS business needs to be about. And you do that by automating, not just with software, with everything that’s included.

Marten Mickos:

Secondly, you need to give customers predictability of cost. You need to be able to educate them on how much it will cost depending on how much they use it so that they can make budgets. The primary customer, the one using it may not be driven by budget and cost. But there’s always an economic buyer somewhere in the company who will look at it as a financial transaction and say, “Okay, you would like to start using this new SaaS offering, how much will it cost? How much will it cost next year? What’s the long-term cost?” And we all know there’s no limit to how many SaaS offerings are available today for any company.

Marten Mickos:

In our case of HackerOne, I remember when we had 200 employees in the company, I think we had 220 different SaaS products in use. So we had more SaaS product solving problems for us than we had employees. And it’s probably still true all that we have done a lot since then. So it’s very important for the financial decision maker to see the predictability of the cost, which means that pricing, it becomes a key differentiator in making a product attractive to a customer. I’m not saying low price, low prices of course is always good.

Marten Mickos:

I’m saying predictability of price so that a customer can know how much they should reserve for it, what they should expect. And it also helps them set expectations, because they have a sense for what good will cost, and when you charge a certain price, they will know what to expect. It’s another topic, but that’s a reminder that we shouldn’t set our price too low because we may actually undersell ourselves and educate the customer to think that there’s less value than there actually is in the product.

Marten Mickos:

So to think about when you’re building a SaaS company, and specifically, I mean a subscription company that delivers results digitally, which is what this conference is about. The business that is today valued at over a trillion dollars. You must try to hide the complexities of the delivery from the customer. A lot of the complexities are essential, they’re important and somebody has to be on top of them. Otherwise, the value isn’t delivered. But it’s your job, even if it looks like the customer’s job, you should try to do it. The more you can offload the customer and make it convenient for them, the more you can sell, the faster you can grow.

Marten Mickos:

Pricing has to be a low hurdle and low friction. Pricing, packaging and contracting so that when you sell your product to the customer there’s as few objections or questions about the pricing as possible. Many times we don’t know how to price, so we price it in a complex way to guard ourselves against unpredictable futures. And that’s understandable. But to really build fast growing businesses, it has to be easy to sign up for the first unit, and it has to be easy to start consuming more. And that’s more difficult to create than usually thought. So the unit of pricing matters, how you price and how you convey to the customer so that the person buying it can go to their CFO and say, “Here’s what I expect it will cost, we use it this much, we’ll go here. And then if it starts costing too much, we will do the following.”

Marten Mickos:

With that when you deliver a value like this, you can get into recurring value and get under subscription business that repeats itself and grows over time. Of course most customers also have a non-recurring business and there’s nothing wrong in that way. If you’re building a startup and a growth company, you will typically have both recurring and non-recurring revenue and both for them is money, both of them are about serving customers. So I wouldn’t worry too much about whether everything is recurring or not. Over time, you should try to build a business of recurring revenue because it gives stability, it gives predictability for yourself and it gives more growth. But there’s nothing wrong in serving customers with other needs that they may have because you will learn things, you will find areas that can later be automated, and be made recurring. So nothing wrong in having non-recurring ones since the beginning.

Marten Mickos:

And once a business gets to scale, margin start to matter, and specifically the cost of bringing everything together that you need to deliver to the customer. And like I spoke earlier, the benefit of this model is that you solve the entire problem, the customer. The downside is that you have a lot of complexity in how the product is composed, consists of many things that cost different things. Some is software developed by you, some is data that you may buy, some comes through APIs, third party solutions, people work and so on. So calculating margins can be difficult, I would claim it’s worth it. And finally, revenue recognition is something that follows after all of this. It’s less of an issue, there’s clear rules on how it should work. It may sometimes affect the composition of the product, where you may not want to mix components in an offering that have different revenue recognition rules. So you have to pay attention that it’s not common, but it does happen every now and then that revenue recognition rules will affect how you decide and on product composition and create the product roadmap.

Marten Mickos:

So a product for a customer is an experience. They have a job that needs to get done, and they bring in your subscription offering, and they experience it as results that come out of it. And that’s how you should measure the value of it. Again, easy to say, difficult to actually do in many cases, because how do you measure the value of work automation software or accounting software made or packages? They can be difficult to measure, but you must look for that true value and listen to your customers how they speak about it, because the way they express the value is the key to how they experience the product, and will be the key to how you can price it.

Marten Mickos:

So in summary, you have a SaaS business, you have a subscription product, it is inside, can be a very complex built from many varied pieces. The complexity inside, the sausage factory that you have inside can be just unbelievable. But yet, you are committed to delivering a simple, singular convenient experience for your customer. And you have to stay disciplined on this and say, “We will not let complexities leak over to the customer side, customers need to get the most convenient that they need.” Even if it is very demanding customers, even if they need detailed technical features, and they say that they don’t mind the complexity, it is always good to reduce complexity for the customers, because every customer is short on time and attention. They want stuff that they don’t have to think about every day. And when you do that, you can establish elastic pricing that’s tied to the value you’re capable of measuring. And if you cannot measure the absolute value, you can measure the relative value, meaning the value against other customers are doing similar things.

Marten Mickos:

This is why scale matters in subscription businesses. The more customers you have, the more you can compare them to each other. And you can give them benchmarks as to how well they are doing, how much they should be paying, and what they should be expecting in terms of value. So with this, when you think about SaaS as not software as a service, but you think about it as a results type, the value that you deliver digitally. That’s how you get a product definition that can scale and produce a fantastic business model for yourself. So with that, thank you for listening. I’m Marten Mickos from HackerOne, CEO of HackerOne. I’m happy to take questions now and discuss these topics or any other topics that you have on your mind.

Marten Mickos:

Here is Rich, my former colleague, Rich, saying, “Will end your presentation with a Nordic drinking song.” Let’s see after the Q&A. There was such a tradition at the company I used to run. And I know quite a few Nordic drinking songs, but let’s see what business questions we have here. If we bundle services into our offering, many customers try to unbundle our services to save money. Do you recommend offering both a bundle option and a line item option? Very good question by Anthony here. It’s a difficult question because we try to always serve the customer in the best possible way. My principle is strong there, you should not unpack it for them if you can just avoid it. They will try to save money, or they will try to be smart but the moment you allow them to decompose it, it’s not sure they will experience the value of the right way.

Marten Mickos:

And I usually compare it to a country club, where if you sign up to be a member of the country club, you pay an annual fee then you get to use everything. You can use the swimming pool, the tennis court, the golf court, anything, maybe you pay small additional fees for them, but you can’t unbundle them typically. And that’s how you create this experience where the customer is forced to committing to you. Of course, as a startup, you feel you can’t afford it. So you may compromise on this principle, and it’s okay in some situations. But if you can hold your fort here and keep it as one product, you will have much more ability to develop it in the future and build a strong engagement from the customer.

Marten Mickos:

Okay, we have a question from Randy. How do you hide the complexities and make the contract low friction with an enterprise B2B SaaS product? Another very good question. I’ve tried, I tried for 10 years, maybe 15 years to make contracts easier and easier, simpler, simpler, pushing for simplicity in the legal text and in the definition of track. It’s hard because you also have to be very precise. And you have customers, when you get into enterprise, you have customers who will do risk assessment and ask you whether it will affect this or that, whether this will apply or not. And you have to be very specific about the rules.

Marten Mickos:

I do believe that you can construct contract templates such that you have summary that’s simple, and then you have appendices or specific terms and conditions where you define the principles and how things work. And you can… And then you can take those documents and bring them to the customer even before you close the deal. And you say, “If you sign up with us, we will ask you to sign these terms and conditions. Look how we’re defining the various items. Tell us now if you have any issues there.” So you can be proactive and preempt some of the… And avoid the problems that otherwise would come in the last moment when you’re closing the deal and when nobody is ready to be difficult, like a vendor will always try to close the deal quickly. Thank you.

Marten Mickos:

Next question here from Edward. Do you have some insights in how to set a good upsell, resale and expansion model keeping it predictable? Good question. I’m not sure there’s a generic model there. I believe that upsell, resell and expansion is a tricky area. And many companies are late in developing the upsell. So you probably have to learn as you go and look for companies that are sufficiently similar and learn from them. But I’m not sure there’s much general learnings there other than what I’ve been speaking about here in my presentation, but it’s a tricky thing, you have to be very tuned into customers. And you will realize that you have some customers that are worth much more than others. And you have to choose which ones you will follow. Some customers, you will do everything for, other customers even if they pay you well, you may not want to develop it into that direction.

Marten Mickos:

Here’s a question from Brett. You mentioned cloud and SaaS are exploding and growth together, how do you or the client determine what’s the best cloud solutions to support your SaaS offering? What key qualities and company and cloud itself to look for? Okay, so I’m thinking how do you determine what’s best cloud solutions to support your SaaS offering? I think you’re asking for a SaaS vendor, what do you use yourselves? That’s probably a very specific question relating to the various things. If you’re asking about cloud platform and which cloud platform to run on, I think we can be happy in the industry now that we have a clear market leader on cloud services, where you get everything you can need and nobody will question your decision. But additionally, we have good competitors to them who have very solid offerings. So you actually have a choice, and you are not wrong in any of those choices.

Marten Mickos:

So there’s flexibility for you to choose the ones you need. And in any particular area where I have had to make the decision, we’ve always had two or three viable options. And we’ve picked one of them based on technical requirements style, level of detail, level of advancededness of the solution. So it becomes very specific the choices. But we are not in a situation that we were in the 1990s, where there were monopolies in this business. Now, we don’t really see monopolies, so you have a lot of choice as a customer. I hope I understood your question, wasn’t fully sure but this was my comment. Okay, here we go for the next one.

Marten Mickos:

Okay, I can’t read the name of the person there properly. But the question is, is there some kind of baseline of how much time a customer can spend using your product to make it actually valuable? Or what percentage of the time they would spend on that job without your product is a good percentage. For example, say I would usually spend 10 hours weekly to manage work on my team, and I decide to hire Monday.com for strictly that purpose, what percentage of the time must I save using Monday.com to make it actually valuable to me worth the investment? Smart question. I would set my own goal, I would say, “If I spent 10 hours now, I would hope to shave off three or four hours using a tool.” I’m not sure it could be more.

Marten Mickos:

And then I would say, “What other benefits would there be?” Not only am I saving time, maybe I get a system of records, so everything is archived and recorded for me, that could be good. Maybe I have a more structured way of delegating work or making decisions. So that could be a benefit. Maybe my customers will be more willing to buy from me because they can see that we are very organized in how we think about things, and we don’t drop the ball and we don’t miss things. So they should probably typically be other benefits as well. The risk is, of course, always that we overestimate the benefits. And we forget that, no matter how many SaaS offerings there are in the world, it’s human beings that really matter. And what humans do is what determines success or not for a customer.

Marten Mickos:

Thank you, David, for your comment there, you’re a great talk. We have a guy called Tom asking, when you say customer, do you first think of the buyer of the SaaS or the system user? We are in the B2B space. I meant the whole thing. But the whole chain, like you have a system user, then you have a buying person, and then you have the financial buyer. So it’s three levels, at least, that you have to convince when selling something. Typically you need to start from the system level to get grassroots buy-in, or let me say I believe in models where you start from the grassroots and go up. Others do the other way, but I think that’s a very solid way. Convince the most operational people first and make them your champion so they can influence the manager who makes the decision and give them the tools to convince the CFO or whoever is the financial buyer.

Marten Mickos:

Okay, we’ll take next question. I’m prioritizing questions with the name mentioned. I’ll take the anonymous ones at the end if we have time. So next question by Rana is what was your aha growth hack that led to scaling? In the case of HackerOne, where I am the CEO, where we sell bug bounty programs, vulnerability disclosure programs. I think there wasn’t just one aha, but the notion that we came to this as practitioners running bug bounty programs, which are extremely nuanced and specific. Like everybody’s unique, everybody’s a snowflake, everybody has their own ways of doing it. Yet, we systematically created a structure for it.

Marten Mickos:

Structured scopes, structured program pages, structured bounty prices, structured this, structure that and it may sound like it would make it more rigid, but it actually opened it up to make it more dynamic and flexible. And now we can go into customers. “Okay, what the bug bounty program? Do you want small, medium, large, extra large?” And quickly, we can set up the whole thing. Even though in reality, there’s 1000 small dials that need to be turned, but we’ve managed to package it in a way that people can come in and say, “I would like a medium sized bug bounty program.”

Marten Mickos:

Okay, next question from Robert, what do you think about actively pushing for pilots so to understand whether the entered service actually creates the desired value? In the ideal world, we should not have pilots because unless a pilot is just the first phase of actually using the product. But if there’s a lot of pilots where start using it and there’s the aha, no, we won’t and you pull out, you create a lot of friction for everybody. Specifically, for the customer who will… When you bring in a SaaS product, you often have to sell it internally to a lot of people. And if you’re going to say, “You 200 people will bring in this software. We’ll try it for eight weeks and if we don’t like it, we’ll stop.”

Marten Mickos:

Then you’re shooting yourself in the foot because they will never really get excited about it if they don’t know it will actually happen. So there’s a certain… Of course, you have to give yourself room for trial and error, you also have to have a certain determination of going once you go, to get people to invest the time to learn the new system and change their behavior. Because whatever you sell, the customer has to change their behavior a little bit, and you want to make that behavioral change well justified and worth the while.

Marten Mickos:

Okay, that’s a question that doesn’t relate necessarily to our topic. I’ll skip that. We’ll go on to the next one. Keith is asking, “Can you share an example of a usage based product/feature that you wrapped into description pricing? And how did you see customers react? Did you change anything based on any positive/negative feedback?” Okay, an example of a usage based product feature that you wrapped. Okay, so this gets very specific. At HackerOne, we do bug bounty program, and we sell triage, we sell the service of analyzing the incoming reports with experts. And they determine how serious or valid the vulnerability is.

Marten Mickos:

That’s sold on usage basis and customers can buy chunks of them or they can pay by the drink, so to speak, pay for each one separately. And our customers, first, were not sure that they could actually have us do it, they felt it’s such intrinsic work that they should be doing it, but many of them realize that we are as good at this, at it as they are. The second was when they realized that the volume will just keep growing. So they might as well buy it in chunks from us. Initially said, “Okay, let’s buy it by the drink. Because we don’t know how much we’ll need. We may stop using it, we may not have that many vulnerability reports. Turns out the volume is just growing.”

Marten Mickos:

So I think our customers have now gotten accustomed to using it and buying it in big chunks. And the feedback we’ve gotten is that we have to, and we are doing it, create quality tiers. So you can get it on different levels of sophistication, because you have some areas where it has to be quick and you care about the efficiency. Other areas, we care about the quality of every single little vulnerability report being triage. So there we’ve learned a lot from customers and particularly from customers who are masters at triage themselves from who we’ve been able to learn best practices.

Marten Mickos:

Okay, that was that question. I’ll keep going. Here’s Katie, asking, “How often do you find…” Oops, sorry, jumped around? “How often do you find in enterprise sales that you’re able to have customers sign your terms versus having to work off customer’s papers? And was there anything that ever was a flag that you needed to start by working with customer terms instead of your own?” Yeah, this is a problem that will never go away from sales. And if you are a startup, you feel you can’t afford to not just take the deal from the large company. In the case of HackerOne, we are so specific in what we deliver that many times, even if we would mentally be ready to accept the MSA from a large company, we can’t because it doesn’t reflect what we deliver. Like they try to impose on us MSAs that define it as a professional service.

Marten Mickos:

It’s not a professional service. The ethical hackers are independent actors, they are not our employees. So we just legally don’t fit into it. And there are some other things where laws and regulations will dictate certain things. So we have to educate our customers and show them that it’s not because of us, but because of the reality of the offering that we have to have a different set of contracts. And what we are learning is we should do it early on in the process so that it doesn’t become a sticking point that just when the deal needs to be closed, but it’s hard.

Marten Mickos:

And in my experience you need some people have done it before, who have the moral confidence and strength to say no to a customer in a useful productive way. So you shouldn’t always agree to what they say. But you should also not be impossible. And people have been a long time, like contract lawyers have done it for a long time. They are amazing at this, everybody loves their work and how they operate it yet they are successfully enforcing and making sure that you don’t give up everything in contract papers.

Marten Mickos:

Lots of questions here. 11:40, we have 10 minutes more to go. I’ll try to get through all of them. Thank you for having so many good questions. Next is Sushil has a question. We’re a bootstrapped company trying to disrupt the market that’s controlled by very large corporations, how do we try to navigate the market in our early stages to keep ahead of our competitors with deep pockets? Okay, I disagree with the question. If you are a bootstrap disruptive company, then you are ahead of your competitors. And if you’re not ahead of your competitors, then you are not a disruptive company. So I must believe that you have something very specific that they can never do. And if they can do it, then you are not disruptive.

Marten Mickos:

When small companies do things, the big companies cannot even dream of doing it. We saw it at MySQL, when we’re competing against Oracle. There was nothing Oracle could do to mimic us. Sybase tried. They delivered a free product to the world and it utterly failed. They could not do it. And I remember with Oracle, we were always having fun with them because we said, “If they ignore us, it’s good for us because then we can just keep selling. If they attack us, it’s the best for us because then we get attention and people will choose our site. And if they say something positive about us, it’s also good because then they say something positive.” So there’s nothing a big company could do to stop us from disrupting the world. And if the big companies can do something, then you’re in the wrong business or you are not truly disruptive.

Marten Mickos:

Okay, next question by Marshall, “We plan to simplify the price structure. How to approach and communicate with customers.” Good point, I would find a few customers who are worth listening to early on and call them and say, “Hey, we’re thinking of simplifying the price structure, could you give us feedback?” If we do A, B, or C? Would you buy more? Would you buy less? Would you be worried? And what other input do you have? So I would listen attentively, not all customers necessarily, but those are known to be sophisticated and good customers. And then when rolling it out, I would ensure the buy-in from them. So that even if there’s some resistance, you could say and show that many are buying into it. And it will happen because there could be customers who you have to be a little bit forceful with and say, “This is where we’re going.” And once they get over their anxieties, they may actually like it very much. But it’s a change management process that you have to be careful with.

Marten Mickos:

Okay. And then let’s take some anonymous questions. Best tactics for saving a customer who tried to cancel. Try to cancel, customers can cancel if they like. If they… I know why I cancel subscription, why we cancel subscription offerings. It’s because they’re not delivering the value or we have something better in mind. So if you’re a vendor, you have to listen to the customer. Say customer, “What is wrong here? Why don’t you… You don’t see value here? What is it? Do you see somebody else with better value? Do you have a big change in priorities? Are you just tired of my face? What is it?” And prompt them to give you the most honest answer. And then don’t promise to fix everything because that’s not believable. But say, “Okay, I’ve taken your input, I will fix, of five things you said, we’ll fix two, and we’ll try to fix the third. But we can’t fix all five. And we hope you will stay because nobody else is giving this commitment to you.” And then you try to do that.

Marten Mickos:

But don’t go in promising everything because all customers, if you could do everything, you would already have done it. Okay. And then a question here, are there special terms in your tech team’s NDA that other SaaS companies could learn from? I don’t think so. I think NDA is just a standard commodity today. And I’m not aware that we would have anything practical and I don’t think they affect business outcomes much. Okay, let’s take one more question here. Anonymous viewer is asking, “How do you price customer value?” I wish I would know. I’m asking you to help me with it too. As a CEO of a company, I spend a lot of time thinking about it, listening to customers, debating it with founders and colleagues. And there are so many possibilities, like is it risk reduction? Is it the productivity? Is it avoidance of problems? Is it the fact that you get record and archive of what you’re doing? Is it that you fulfill a compliance requirement? Is it that you make your own customers, end customers happier or better?

Marten Mickos:

There’s a million of them and it feels good when you start discussing it, there’s so much value here. After three hours of thinking, you may still not really know how to measure it. So it’s an essential problem to measure the value and come up with the way to do it. My advice to do when you are in this exploration is do explore, try different pricing, sell with different pricing to different customers and see what happens. Don’t be afraid of making those bets because otherwise you will never learn. And listen very intently to customers, and don’t believe that they will immediately give you the true answer. They may not even know the true answer, you might have to go to their boss or their boss’s boss to understand it. So it’s a major function of a product marketing organization to figure out how customers see value.

Marten Mickos:

Ladies and gentlemen, girls and boys and everybody, thank you for listening to me today. So many great questions that showed up here on the Q&A forum here, I’m very thankful for them. I hope they’ve been useful to you. I hope you’re building amazing, amazing subscription businesses. Don’t look back, just look into the future. Don’t copy the old. They don’t know how to do things in the new, you know how to build new things. You find me on Twitter under my name, Marten Mickos, if you’d like to follow me, and I look forward to hearing from you. And please tell me your success stories, your best learnings, write your blog posts about it and share that knowledge because we are now–The whole world is rushing into the digital era faster than ever before because of COVID. And it’s up to companies like ours to make it happen in a wonderful way. So I’ll thank you with this and hand it back over to our hosts and hope you’re having a great SaaStr conference, learning a lot, sharing a lot, making a lot of new friends and contacts. Thanks, everybody.

SaaStr Speaker Team:

Hi Martin. We’re getting a few requests for the Nordic drinking song.

Marten Mickos:

Oh, the Nordic drinking song. That’s true, yes. Well, there’s one that everybody will sing and I will sing it for you then, but there are no guarantees of any pleasure or enjoyment but because you asked, in Scandinavia we usually sing a song before we drink something, so here we go.

Marten Mickos:

(singing)

 

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