Building a customer-centric startup isn’t easy. There are a lot of forces working against you. As a founder, you have to want to do it—especially if you are looking to get funding from VCs. It needs to be a selling point in how you approach the marketplace. So, I’ve been thinking about what a customer-centric startup looks like, and how it comes about. Does it happen? If so, why, and when?
Those thoughts and questions led me to have a conversation with Nils Vinje, Founder and CEO of Glide Consulting and 30 Day Leadership. Following are some excerpts from that conversation (edited for flow & context.)
I was watching one of your customer testimonial videos—a startup that had an AHA moment and sought out your consulting services. It felt like a transformation had taken place that hit the core of what I’ve been thinking about: Is there a customer-first startup? If so, what does that look like? Does it require an enlightened CEO? What if they’re forced into it? You have a lot of experience with enterprise, and you've also worked with a number of startups. So, I thought you might have some perspective on that.
Yeah, for sure. The founder’s culture pretty much determines what type of organization it is going to be. And most of those organizations, the vast majority, end up Sales focused. There are relatively few that will start out customer-focused. And I think this is a systemic challenge in the startup space. Because all of the funding comes with the expectation of doubling year-over-year growth, like in the super hyper-growth markets. It’s competitive. And the founders have been in those environments. The expectation from the board is that it's 100%-- at least 100%-- year-over-year growth. And in those situations, you can't really be all that customer-focused if you're marching to the beat of: “We have to deliver on this 100% year-over-year growth. Otherwise, we will not get our next round of funding, or we will not get the valuation we want, or we will be in jeopardy of XYZ...you name it”
I think that's just part of the startup gig that is the challenge now. People-- like Kanjun Qiu at Sorceress (from the video), she was extremely forward-thinking. The reason why I get called in most times is when people have had some unexpected churns and occurrences, where it's like: “Oh, my gosh, how did we NOT know that was going to happen? That one hurt really bad. We need some help.” Right? They had been through something like that. They were pre-Series A, and then they raised A shortly thereafter. But I do remember that they were very early. She was very early in engaging, to get in front of all that stuff that she knew would happen. She had heard stories from peers and others in Y Combinator, and she had been through that as well. But she was very, very forward-thinking. And that helped a tremendous amount.
So, the CEO, being forward-thinking and knowing that this will be a problem: “If we don't nail it before it even is a problem”-- that’s a lot better from a Customer Success standpoint. Otherwise, you have a Sales focused “grow, grow, grow” and then all of a sudden you have to deal with the problem of churn down the line.
So, do you think that it's something that Y Combinator is espousing? The idea of being customer first?
Yeah, I don't think it was necessarily a Y Combinator thing. I consulted with another company that was a Y Combinator company but they subscribed to the 100% year-over-year growth and had some of the top venture capitalists in the valley on their board. That was just part of the gig. It was polar opposites.
And then there are others: Segment I worked with when they were very early in the A round funded range. They were also Y Combinator. And they recently topped out and sold for $3.2 billion. They had an incredible rise and built an incredible product with a great CS organization. It was super cool to work with them when they were super tiny-- in an almost shoebox office. Their founder was subscribing to that growth, but they just handled it differently. So, the founder (or founders) plays such a big, such a massive role in the culture. And in each of those occurrences, the culture of the company was shaped by that founder or group of founders.
That's interesting. Have you seen any sort of commonalities among the founders that think about customer success or try to be customer-first throughout the organization?
One of the main things with Kanjun (Qiu of Sourceress) that always struck me was she was incredibly able to analyze future situations-- she could break problems down in the future, that hadn't even happened yet. She had this incredible ability to do that. She saw these things long in advance. The other CEO that was focused on 100% year-over-year growth was solely focused on the revenue, on the ARR number. Frankly, that was the metric that he was charged with from the board and the expectations that came along with all the money raised. And that was that. On Segment's side, what I mostly recall was that they were very level-headed. They were all first-time founders at that company. The CEO, Peter, stayed as CEO through the entire thing all the way to the end-- which is kind of unheard of—getting to $100+ million revenue and $3.2 billion in valuation. It's kind of nuts.
So, you know, I think of the ability to see things in the future, plus the ability to truly understand the fundamentals of how the SaaS model works. It's kind of astonishing that we're in, what are we in 2021? SaaS has been a thing for a long time, a long time in our world now, right? And still, there is this assumption that everything is always about Sales, at all costs. And that was great in the enterprise days when you could sell anything and you had them hooked-- you got all the money upfront, and you had them hooked over 5-7 years, but that’s been long gone.
However, the leadership in most of these companies is still coming from people who grew up in the enterprise model. It's still pervasive. So, I think it'll be another, I don't know, generation or two of leaders going through these organizations before the majority of people who are leading companies will have been born and bred in SaaS, and actually understand the fundamentals of how SaaS works. Those leaders will understand the fact that you need Recurring Revenue, not just the one-time revenue.
When you say generation, do you mean demographic generation or business generation?
No, a much shorter time horizon, “leadership turnover” generations. The leaders who are coming up through Sales ranks and CS ranks now-- in 10 years, they’ll be the future leaders, either senior or C-level executives at companies out there. So, it's going to take a long time. Even so, I would have thought that this (Saas) model would have been very clear a long time ago. But I thought that back in 2015 because it’s really not that hard to conceptually understand.
It’s stuff (revenue) leaking out—And that's bigger than the stuff (revenue) coming in. So, how's that going to work? But it seems to have been overlooked for a long time.
NRR includes Retention as a factor. And we hear about boards focusing on NRR more. Do you have an opinion—will NRR help to usher in some sort of Customer Success focus on the part of CEOs or...?
So NRR, we're talking Net Revenue Retention, right? Yeah, cool. Yes, I think the Retention metric is the most important one for a CS leader to be responsible for, period.
The reason being is, that while they don't control everything-- they never will-- but they are responsible for INFLUENCING every single piece of the puzzle that factors into Retention, right? Good and bad. Product and Engineering and Support and Sales, Marketing the whole thing. This is why CS is one of the most difficult jobs out there because you don't control any of that stuff. But you're responsible for all of it, right? It's really hard. So, I advocate with my clients to own that Revenue Retention number.
There's a crossover point in every startup's life, where the Renewal amount of dollars up for Renewal every quarter will cross over and become greater than the new Sales number for every quarter. So, in the early days, new Sales is the biggest quarterly number coming in. But then it hits a point where all of a sudden that Renewal stack builds. And now the CS leader technically owns more Revenue for the company than anybody else in the entire org. So, for that reason alone-- it helps with leverage and getting things done. Because if that number is going down or has some trouble, then it's their responsibility. And if they own that number-- which I did as well, previously, it's a hard place to be sometimes if there's not a great Product-Market fit, or if there's a lot of other systemic issues in the company. It's tough. But it is important for having that seat at the table because you're talking about potentially earning $3-5-10-20 million of company revenue. And that's significant.
And if the customer calls out Product-Market Fit, then you have the data point to share internally.
And if Sales owns Retention, you have them thinking more long term, because then their feet are to the fire, to get that good fit.
Yeah, that one's still the hardest to overcome. The number of companies that have sales comp plans that are aligned with Retention... If they exist? I don't know, maybe somebody out there has one, it would be interesting to hear about it at some point. But most get comped right upfront at the beginning. And then poof, they don't have much involvement in Renewals.
What if the board or VCs ask for NRR-- does that drive the CEO to think about Customer Success or to become Customer-Centric?
I would hope so. The VCs and the valuation of a SaaS business are driven in the greatest part by your ability to effectively renew and expand your customer base. Now with a net number, you can overshadow a lot of stuff. If you lose a big bench return, but you pile it on with a whole bunch of new stuff that's going to churn in 12 months. You still have a good net number today, right? So, you know, it makes sense that VCs are looking at it. And when it comes to measurement of the effectiveness of the overall org, I think it's the most important metric. However, it's the contributing factors that get in the way, right?
The fact that there are a number of contributing factors to Retention makes it a really, really hard thing especially for a CS leader to be in a position where they're saying, “Yes, Retention is going down. For these reasons, I have brought this to the attention of the organization.” And the organization has essentially said, “I'm not interested.” Because it's not directly related to whatever they have to do right now, and they think that because it benefits only the existing customers, they’ve got to focus on new customers or some variant of that, right? So, (NRR) is there as a tool to use from an influence perspective, but that is also a leadership challenge, and only the most skilled leaders are really able to navigate that.
CEOs all day-- like the one I worked for the doubling year-over-year-- would champion Revenue Retention. But he had no intent on being more customer-focused to drive Retention. It was "Yeah, we need higher Retention", you know, and then he would continuously focus on Sales. That was just the mindset: It was just all growth comes from new sales. And that was part of the downfall of that organization.
Because eventually, it will be. If a leader truly wants to be short-sighted, they can figure out a way to do that.
100%! And that’s where the cultural element comes in. As soon as that (customer-centric) culture is part of the org, it's a far better use of energy, talent, strength, and leadership. But, I think, you have to acknowledge the environment that you operate within and figure out how to run what you want to run inside of that environment, as opposed to going in and saying: "This is the right way, we should all be customer first." Because the reality is, it's just not going to fly. Culture does not change fast.
We, as CS leaders-- myself included, for a period of time before I really understood this-- we'd love nothing more than to be responsible for the strategy that says, “We’ve got to take care of our customers. They'll take care of us”, blah, blah, blah. The reality is, if it's not there, it's probably not going to get there. And that's the hardest part for most people to come to grips with. Because it means not being frustrated with reality. It means learning how to work to get done what you need to be done.
So ultimately, it comes down from the top. Someone at the top has to have that epiphany...
That's right. I'll give an example. One of my clients, a very large publicly-traded company, has been around for a long time and is owned by an even bigger company. They have been a managed service provider for many years. And that was how they operated all the way up to now. Now, over the last three years, they've had two different attempts at grassroots efforts to start a CS movement. Both of them completely failed, utterly and miserably. During this time, they’ve also built a SaaS product, because they recognized that the future of the business was SaaS, not managed services. As the new platform was coming to fruition, they went out looking for experts to help guide them, and I became the lucky consultant that got to work with them. I’ve been guiding them through the steps over the last six months of how to put together their foundation for CS. They decided to take this organization of 350 people and said: "You're now the customer advocacy organization. And you guys go figure out how to do all this. Work with customers on our new platform." It was a tall order.
Right. BIG. So, I started having conversations. There's a VP with his nine direct reports, and they encompass the 350 people. The VP reports to a COO who reports to a President, and I had conversations with each one of them. I work with the VP all the time, but I had conversations with the COO and with the President, and they both asked "What do we have to do to make this different?"
I told them, "Top-down support. CS is a philosophy, it is not a department, and when you get tired of saying that, you're just getting started. Over and over and over..." On the first call, I asked “Why is this third round going to be different?” Because I didn't really want to get involved if it was going to be a show. And they said: “We’ve got top-down support from the CEO of this company, all the way down, from the President, 100%. We are all about transforming into a customer-first organization.” This is gigantic — like 1000s of people in the entire company-- and the entire company was pivoting.
So that mandate came from C-level, board level, of a huge publicly traded company: “The future of this business is going to be in SaaS. And the future was going to be in delivering incredible customer experience, and you guys are doing a crappy job of it now. So, turn it around when you release this new platform”. That is the only reason why they've been able to get this going as fast as they have. We designed and launched the whole thing in, I don't know, 90 days or 120 days? Short.
That's very quick. And yeah, nothing like a board mandate.
Exactly. 100%. But that type of directive, and until there's that pressure, it'll be up to the founder, especially in the early stages. Until there's that pressure, it'll be a founder-driven directive.
So that's interesting. This is a large enterprise. We were talking about startups. Clearly, there are some fundamentals that work across both. What other differences would you say, in terms of startups versus enterprise are there?
In the grand scheme-- you know how I look at things at a framework level? So yeah, it's all the same. I have run the workshops with them (enterprise & startup) exactly the same way, I ran the workshops with Kanjun at Sorceress where we had three or four people in a room and that was a third of the company. I ran this (workshop) with a VP and nine directors. And they're responsible for nearly 400 people. Literally the exact same workshops, right? To define the same things, to get clarity on all these pieces. Now, the difference is, they have an army of people, and I'm just the guide to do it. And in Kanjun's case, I do a little bit more of the heavy lifting and helped them build stuff. So, from that standpoint, that's the only real difference.
But that's why I focus on these foundational elements so much because, without them, everything else is just built on top a house of cards. And I've yet to find the organization that has nailed this perfectly. And it's the same-- I've solved the same problem for 6+ years consulting, and solved it myself (in past roles). But it's the same problems I solve over and over again.
In past organizations where you set up a Customer Success program, was it sustainable after you left, or is it entirely based on the people left behind?
The first company where I was VP was a very customer-focused organization. When I started, it was early stage, but the founders were very customer-focused. NPS was like the thing they held up on a high stool. They championed everything—from our first conversations they talked about how great their NPS scores were, and how much their customers love them, and how dedicated they were. That was purely the founders, the two founders believed very highly in delivering customer experience. The same systems they put in place were continued.
The second company where I was VP, focused on 100% growth and the whole entire organization was a bit of a house of cards. Given the false premise that if you grow at all costs, you can somehow solve Retention at some point. And that just simply wasn't true. So, there was nothing that could save that company except what they ended up doing, which was firing nearly everybody and going back to the drawing board and starting over. Kind of sad, but it happened.
In that circumstance, you have to rethink from square one.
Yeah. The Product-Market fit wasn't there. They had a great Sales message—the Sales-Message fit was there. But the Market-Fit was not there. And they had hockey stick growth. It was very successful from the venture capital side of things. But once that hockey stick came up for Renewal in the first year, and then the second, it was a very, very dismal scene.
What about Product-Led Growth? How does that impact your approach to Sales and Customer Success? Or would you say, as long as you're addressing the fundamentals, you’ll get there?
The application-- or solution, or product-- plays a huge part, right? Product-Led Growth in a B2B SaaS Enterprise is different than a B2B SMB market. The end customer is really what determines whether or not Product-Led Growth can happen. Imagine Workday for instance. Product-Led Growth doesn't really happen in Workday. Right? It's just not a product that's designed for that-- it's an ERP system built and put on the web. There's not a lot of viralness that's going to happen. Perhaps some future feature usage can always help. But when the Account Executives and the CSMs who work for Workday are working with their clients trying to sell in bigger ERP projects, or get into new parts of the business, that doesn't come from the product, right?
Now take something else that is much smaller in scale, highly utilitarian, and easy from a feature and function perspective. If you hit the right combination of stuff, then absolutely, 100%. Either way, I think the fundamentals, my five things your customer strategy must have-- that's my foundation framework. And those things still apply, regardless of how you implement them. They're going to be implemented in very different ways in a product-focused company that is dealing with a smaller, relatively smaller, ARR product than a larger enterprise that's purely an enterprise beast type of solution. But, the foundation still has to be there in some form or fashion.
You still have the same fundamental questions. But it’s situational, so the application and the implementation is what changes.
That's the only reason why I've been able to do what I do for the last six years. Here are the foundational pieces. Let me ask you a bunch of questions. And let's figure out how to put this in your world and make a custom solution for you. It's never cookie-cutter, but the foundation is the same. The building blocks are the same. It's about tuning it for the environment of the customer. That's where the real magic happens.
About Nils Vinje:
The Customer Strategy Method used by Glide Consulting is the result of Nils’ extensive experience serving fast-growing SaaS businesses as a high-impact consultant for 6+ years. In each engagement, Nils has helped his clients build world-class customer strategies that drive customer engagement, adoption, and expansion. To learn more, go to glideconsultingllc.com. In 2020, Nils wrote the best-selling book 30 Day Leadership Playbook: Your Guide To Becoming The LeaderYou Have Always Wanted To Be and now offers leadership development programs for all levels - individual contributors, managers and directors, and VPs. To learn more, go to 30dayleadership.com.
About Jan Young:
For the past 5 years, Jan has been consulting with founders and startups and evangelizing: When your customer is successful, you’re successful. Jan serves on the board of Gain Grow Retain as co-lead of the Voice of DEI initiative and is a Founding Community Lead for CS Insider, including sharing her thoughts on customer-centric startups via this series, and diversity and inclusion via the upcoming series: DEI to Achieve Customer Success. Connect with Jan on LinkedIn or at JoYful Customer-Centric Consulting.