Tackle's John Jahnke on efficiently using capital
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An Introduction to John Jahnke
How often do you go to the grocery store?
I’ve managed to get my trips to Trader Joe’s (don’t judge me, I love their Joe-Joe’s) down to once every two weeks. I factor in all the snacks, frozen food, and perishables to a point where I manage to get through a month with only two refueling stops. This has made it so I’m saving more money than if I were to go once a week. Whenever I go there I always end up buying an item or two that I didn’t plan on getting (increasing the overall spend).
Running a SaaS and Subscription business is similar, and no I’m not talking about the office snack budget, I’m talking about capital. Whether you’re customer funded or in a late-stage seed round, you’ve got resources you need to manage. And the best way to do that is to have a framework for using capital efficiency.
Meet John Jahnke (John Yawn-key), CEO of Tackle.io. With a career spanning multiple decades as well as being backed by Bessemer and a16z, John has an educated look into what using capital effectively means.
Key Term
What is capital efficiency?
Capital efficiency refers to how efficiently a business uses its capital to operate and to scale.
Why is it important?
Capital efficiency is important in order to be able to grow your business properly. Capital efficiency fosters good business habits, which in turn will boost profitability and growth. Furthermore, aside from helping you achieve profitability and growth, capital efficiency also helps you withstand and overcome unforeseen events or obstacles. Being cautious with your capital will allow you to be better prepared to face challenges, and in business there is no shortage of challenges.
Action plan:
What to do today:
- Follow John Jahnke.
- Schedule a time to meet with your leadership and financial teams.
What to do next quarter:
Develop a capital-efficient framework to help you make sound business decisions and hold you accountable to them.
Starting and running a business is expensive. Utilizing your capital wisely is absolutely crucial no matter what stage your business is at, but when you’re first starting out, it’s of great importance. Achieving capital efficiency, however, is easier said than done, especially if you’re newly entering an existing industry. So, we’ve gathered some helpful tips to help you get started.
Nail your value proposition as fast as possible
- When you’re first getting started, sales conversions can be difficult to obtain, so it’s important to do all that you can to help make those conversions. Having an effective value proposition will ensure you’re attracting the right prospects, increase customer engagement, as well as differentiate you from your competitors. All of of which will help drive your sales conversions and significantly impact your revenue.
- Additionally, your value proposition can also influence investing decisions as it will help investors understand your positioning and ultimate goal.
Hire the right people
- Hire appropriately and according to what you really need to get started. As John suggests, determine the minimum viable team needed to pursue a goal. This not only refers to your in-house hires. It also refers to hiring the right freelancers or contractors.
Focus on what matters
- The fastest way to unnecessarily burn through your capital is to try and do things at the level of an established company. Understand that you can’t do everything right away. Focus on what you can do with the money and resources you have, and do it really well.
Avoid unnecessarily reinventing the wheel
- In business, time is one the most valuable resources—time is money. And there are times when it makes sense to do something or build something from scratch, and there are times when it’s simply a waste of time and resources, which includes your capital. It’s important to figure out early on how to efficiently develop and produce. Utilize templates, frameworks, and applications that are already proven to work and save you time.
- For example, instead of coding your own website, which would be very time consuming, buy ahigh-quality templatethat will not only save you the time, but also money.
Save wherever possible
- This bit tip might seem obvious, but it's surprisingly often overlooked. There are many ways to preserve capital. You don’t always need the most expensive thing. Expensive doesn’t always mean it’s the best for your business. Focus your spending on what makes sense for you business and its long-term success
What to do within the next year:
Capital efficiency is an ongoing process and practice. Continuously evaluate the output and implement the needed modifications to improve any and all processes.
Who should own this?
Leadership and finance, or anyone in charge of budgets.
Do us a favor?
Part of the way we measure success is by seeing if our content is shareable. If you got value from this episode and write up, we'd appreciate a share on Twitter or LinkedIn.
00;00;00;08 - 00;00;23;23
Patrick Campbell
How often do you go to the grocery store? It's an interesting question because when I was living in Boston, I found myself going almost every other day. And now that I've moved to Utah, I've managed to get my trips to Jojo's. And what I mean by Jojo's is Trader Joe's down to about once every two weeks. I factor in all the snacks, the frozen food, the perishables, all to a point where I can manage to get through a month with only two refueling stop.
00;00;23;23 - 00;00;42;02
Patrick Campbell
And this has made it. So I'm basically saving more money than if I were going once a week or every other day. Because every time I go there always ends up being an item or two that I didn't really plan on getting, which obviously increases my overall grocery spend. Running Assassin subscription business is actually pretty similar and I'm not talking about the office snack budget, obviously.
00;00;42;02 - 00;01;07;13
Patrick Campbell
I'm talking about capital efficiency, whether you're customer funded or in a late stage pre-IPO round, you've got resources you need to manage. And the best way to do that is to have a framework for using capital efficiently. And one of the best people out there in terms of using capital efficiently is John Yankey, the CEO of Tackle Dot IO, With a career spanning multiple decades as well as being backed by Bessemer and A16z.
00;01;07;20 - 00;01;38;12
Patrick Campbell
John has an educated look into what using capital efficiently and effectively actually means. Learn more about his journey and more coming up next. From possible recurrence, protect the hustle. We explored the truth behind the strategy and tactics of B2B SaaS growth to make you an outstanding operator. On today's episode, John Yang dives deep on using capital efficiently. We talk about market integration, the baseline of effective selling, the framework of capital efficiency, calibrating planning cycles and insights on product stacking.
00;01;43;04 - 00;01;45;09
Patrick Campbell
Yeah. Who are you? What do you guys do? Let's start there.
00;01;45;16 - 00;02;03;11
John Jahnke
Yeah so I'm John Yankee CEO tackle and we help software companies sell through the cloud marketplaces. Our platform eliminates the engineering work that they'd have to normally build software to sell software. We try to make that go away. We work with us Azure and GCP, and we work with seed stage startups up to some of the largest software companies.
00;02;03;11 - 00;02;21;07
Patrick Campbell
And selling through these cloud marketplaces. Explain that to someone who doesn't get it because what I found is there's these companies that do this, like basically your customers who are just crushing it and you wouldn't even know. Yeah, And all of us, like bozos out here are like trying to sell direct and all these other things like, So explain and explain that model.
00;02;21;09 - 00;02;46;07
John Jahnke
Yeah, I think the you know, if you think about where the budget dollars in Enterprise is going, they're being consumed by the clouds and marketplace is a way to tap into the cloud committed spend and then put third party software directly onto your cloud. So if you're a company that has a value prop that a normal cloud buyer would resonate with and almost all companies these days do, you could ask them that question of, Hey, would it be easier to buy from us on your cloud, Bill?
00;02;46;07 - 00;03;11;05
John Jahnke
And then you can use a budget as well as the contracting vehicles provided by the cloud providers in order to transact like new deals, faster, bigger deals. Our first customer was New Relic and they were trying to build for Marketplace and were struggling. They just didn't have the expertise at the time and they're an amazing product company. They have hundreds of engineers, but all those engineers wanted to focus on building features that delighted their customers and not doing these cloud marketplace integrations.
00;03;11;05 - 00;03;15;12
John Jahnke
So that's where it became. They're like, Hey, if half of what you say is true, we're in. It's like.
00;03;15;12 - 00;03;25;01
Patrick Campbell
Mainly things that like tie directly into cloud or is it something where it's like it can tie in to the cloud spend, but it's not necessarily like a DevOps tool or in.
00;03;25;01 - 00;03;50;19
John Jahnke
The early days of marketplace, it was very much more developer aligned, IT infrastructure aligned. So some of our early customers were DHRUVA and OR0 and New Relic and Cyber Ark. Pagerduty was an early customer, but now you're seeing as cloud budget moves from a kind of departmental decision maker like Director of Development or Director of infrastructure to an enterprise decision where most CEOs and CFOs are involved in the WHO do we strategically partner with?
00;03;50;19 - 00;04;15;11
John Jahnke
From a cloud standpoint, it shifts the budget center to procurement. Who's looking at how do I get the most out of my cloud budget? And they think much more broadly. So we actually we just published this of the Cloud Marketplace report and 60% of the people who were not in technology role said they had bought through Marketplace in the last year and they all said they would have gone and we actually just launched it got announced today with Terra soft and Zoom.
00;04;15;11 - 00;04;23;20
John Jahnke
As Zoom is going into the US marketplace, we partner with Kara Soft to help them solve for government. So we're seeing a lot more from a business buyer standpoint.
00;04;23;21 - 00;04;27;27
Patrick Campbell
This is this. Yeah, this literally just because of internal procurement.
00;04;27;27 - 00;04;43;18
John Jahnke
Versus budget, like access to the cloud budget and especially as a start up and we were born there. No one had a budget line item for cloud marketplace middleware, but we were able to we sell through the cloud marketplace like, Oh, do you want to put, put that on your AWP or Azure bill or GCP bill? And we were able to grow really easily that way.
00;04;43;18 - 00;05;09;02
John Jahnke
And then they all offer some form of standard contract where you can just ride along. And if you think about app stores like no one reads the terms of service on the Apple App Store, like scroll, scroll, click, yeah, some good, you know, that's where these clouds are going, where people who who are there are, you know, the buyer's going to be like, all right, I have some level of comfort that under the umbrella of eight of us or Azure or GCP, that this is a good product and I can use it without any fear.
00;05;09;07 - 00;05;26;01
Patrick Campbell
I think it's a lot of people when they're selling or having a company, they don't realize that the way an enterprise buys is so crucial to like getting across a deal. Yeah. What's the type of company like that should be on, you know, doing this or one of the type of companies Like we're not quite there yet.
00;05;26;01 - 00;05;44;07
John Jahnke
Anyone who can answer that question of would it be easier to buy from us on your cloud? Bill? If your buyer says yes to that, then there's an opportunity to sell through Marketplace. I do still think we're in the era. We're kind of transitioning between I.T, infrastructure era and cloud marketplace to the business application era of cloud marketplace.
00;05;44;07 - 00;06;01;04
John Jahnke
And you know, one of our customers is seek in their Iot manufacturing platform of Northeast routes. You probably know that. And they've had a lot of success in marketplace even though their economic buyer is in traditionally the person that owns the cloud budget. But they're close enough to it to say we want all of this data flowing to the cloud.
00;06;01;04 - 00;06;20;09
John Jahnke
So there's alignment with the stakeholder who's buying and the concept of cloud. And I think you've seen a lot of push from the cloud providers of vertical eyes. So like Amazon and Microsoft and Google are all talking about solutions for different verticals. And the more they look to vertical is their clouds, the more I think that opens up marketplace to pretty much any software that's out there.
00;06;20;11 - 00;06;35;06
Patrick Campbell
Yeah, super interesting. It's just one of those things that's always kind of funny to look at, like obviously what works, what doesn't, but also like it's always hard to figure out are you like putting a square peg in a round hole or are you literally like that round peg that needs to be there?
00;06;35;06 - 00;06;38;05
John Jahnke
If people are unsure, we encourage them to go, go find demand.
00;06;38;12 - 00;06;42;03
Patrick Campbell
Like start with demand. You're not just going to sell, tackle and just forget.
00;06;42;03 - 00;07;03;11
John Jahnke
Don't do. If you build it, they will come. Marketplace, go find some demand. Ask those questions, understand your value prop for why your product and why a cloud prior and then see and more of our customers today are showing up with a buyer on hand or a multiple buyers in hand where they're like, All right, we already have someone and then we can help them kind of list and start selling in weeks instead of you know, months if they try to do it on their own.
00;07;03;17 - 00;07;06;28
Patrick Campbell
That's interesting. Why? Why this over? Anything else you could build or start?
00;07;07;18 - 00;07;28;09
John Jahnke
So founders and I, we all have been in enterprise software our entire career and always in sales or customer success or presales. And, you know, Dylan Woods, our founder and CTO, he was he was actually playing around with Marketplace for a different companies like, I think, you know, the clouds have changed the way so many things operate, but they haven't changed the way that software sold.
00;07;28;09 - 00;07;50;00
John Jahnke
And I think this marketplace thing offers an opportunity for the cloud providers to go disrupt the way software sold, but it's not easy. And I think there's a way for us to come up with a product to make it easy. So we kicked off raising a seed round at that time to go experiment. We started to experiment, played with a few different ideas, and then landed on this middleware for cloud marketplace value prop.
00;07;50;00 - 00;08;11;07
John Jahnke
And it was funny, like in the early days of product market fit, you're just, you know, who's your first customer? How do you help them deliver value? How do you make that repeatable? And we were able to go through a pretty interesting cohort of customers as our first group that was there. That's cool. Yeah. You know, New Relic, as I said, Pagerduty Auth0 Cyber are as a lifelong seller.
00;08;11;07 - 00;08;14;09
John Jahnke
The chance to change the way that software sold is a ton of fun.
00;08;14;09 - 00;08;21;06
Patrick Campbell
Yeah, yeah. So it's the classic like we saw the pain and needed to solve it. That answer. Yeah. Why tackle you? Big fly fisherman? Yeah.
00;08;21;21 - 00;08;29;14
John Jahnke
So Dylan and Brian, they're both from Boise, Idaho. They go New York, so they're super outdoorsy. They actually have the name of a company before the company.
00;08;29;14 - 00;08;30;20
Patrick Campbell
Like we're going to go like.
00;08;30;20 - 00;08;35;06
John Jahnke
We know we're going to start a company. We need to like post up on a name that we like. And there were requirements.
00;08;35;06 - 00;08;36;19
Patrick Campbell
That connect to Brown. It had to.
00;08;36;19 - 00;08;48;27
John Jahnke
Be a common word. It couldn't be something like this. MASH together words or something that's really hard to pronounce. So and they found tackle that I o the logo actually is ones and zeros in it. So it's a fly made up of 101 zeros.
00;08;48;27 - 00;08;55;16
Patrick Campbell
I like that. Yeah. That's cool. I don't understand. Fly fishing. I'm into Utah. Everyone loves it. I'm like, I don't get it.
00;08;55;16 - 00;08;56;07
John Jahnke
Have you tried?
00;08;56;16 - 00;09;14;14
Patrick Campbell
I like, Yes, but not seriously. So it's a little unfair. And I also, like I grew up hunting and so it feels kind of like arrogant of me to be like, Oh, you know that thing where you do that? But I'm like, basically fishing on land, you know, hunting for something, which is the same thing. I'm going to judge you for your thing, but what are you doing before this?
00;09;14;14 - 00;09;18;04
Patrick Campbell
Like, how did you get here? Like you mentioned, you were doing enterprise sales, but like, what was that journey like?
00;09;18;05 - 00;09;38;00
John Jahnke
Yeah, So I started it started my career as an SC at EMC in 2009. I actually was a data general customer and he bought Data General in the late nineties and I happened to be one of the handful of people that knew something about open source and storage and so found my way to an AC role. Never really knew what that meant until I fell in love with the job.
00;09;38;00 - 00;09;49;04
John Jahnke
It's like the intersection of Go to market and product and I always tell people new in their career, I'm like, I think product management and SC are the best place to start. If you want to be in enterprise software because you really can learn.
00;09;49;04 - 00;09;50;04
Patrick Campbell
You see everything. Yeah.
00;09;50;05 - 00;10;15;13
John Jahnke
So there and then just grew up in like field facing roles, mostly enterprise, always emerging tech. So yeah, pre-sales and services and sales. And I was going to leave EMC in the late 2000, so like 28, 29 and start of the US migration company. And then yeah, we were going to acquire this big data analytics startup Green Plan, and some friends convinced me that I should stay and go help green plan scale.
00;10;15;13 - 00;10;24;01
John Jahnke
So I did that and that's where Brian Doyle and I met in 2010. And then Green Pond became the Foundation for Pivotal, which was a big software company that went public. We spent a lot of.
00;10;24;01 - 00;10;26;01
Patrick Campbell
Time company that no one's really heard of. Yeah, spent a lot.
00;10;26;01 - 00;10;49;06
John Jahnke
Of time helping enterprises like change the way they build software and leverage data. So that was a really, really fun journey. I left there in 2017 and went to Cognizant to drive digital engineering, which was, you know, evolving. The 65,000 software engineers of Cognizant had into product engineering teams and so spent a little while doing that. And on that journey is when you know tackle got started.
00;10;49;06 - 00;10;50;23
John Jahnke
So I joined that shortly thereafter.
00;10;51;13 - 00;11;07;28
Patrick Campbell
EMC is one of those companies that a lot of people have no idea what they do, but a lot of people use them, you know, and spend a lot of money. But their sales organization is known for being very good and their engineering organization as well. So they got a lot of things going for them. What do you see that like?
00;11;07;28 - 00;11;14;15
Patrick Campbell
EMC got so right and was like such a good training ground for like you as well as other people that you just don't see in other places?
00;11;15;08 - 00;11;38;08
John Jahnke
Yeah, it was interesting. So I joined in 2000. We scaled from 15000 to 37000 people in the next year and then 911 hit and the economy went sideways and we shrank to like 12,000 people and the 12,000 people that were left were unbelievable. It really became the Foundation for growth. And Joe Tucci had taken over as CEO and he was a really customer centric like do whatever it took for customers.
00;11;38;08 - 00;12;01;23
John Jahnke
And we we worked with a Fortune 2000 that was our primary customer base. So I worked with lots of big banks and very technical organizations. And just like the whole culture, culture centered around customer obsession and kind of I think long before you maybe popularized or Amazon popularized the customer obsession as a leadership principle. But we live that way, too today.
00;12;01;23 - 00;12;19;00
John Jahnke
I think, you know, new founders who grew up in engineering roles and I was like, you have to you have to get comfortable selling like. And that's that's not just like getting the deal is not the thing that matters. It's actually making your customer successful. That's like putting those two together. So you have to come up with something that's good for them and good for you.
00;12;19;00 - 00;12;28;01
John Jahnke
Everyone wants everyone to win if you solve problems for people. Yeah.
00;12;28;01 - 00;12;38;22
Patrick Campbell
What's the biggest difference that you see between like, I don't know, the mid-market or even below the mid-market sale versus like selling to the Fortune 2000, which tends to be, you know, if you're if you will.
00;12;39;06 - 00;12;58;01
John Jahnke
It all comes back to value. Like what value are you delivering and how do you explain that in a way that makes sense to people? And really big companies want to you know, they don't necessarily want to partner with hundreds or thousands of companies, even the most enterprises have thousands of partners that they work with. They're trying to think about how to consolidate.
00;12;58;05 - 00;13;23;16
John Jahnke
You really need to understand the details of their business. And their problems are really complicated. So unlike in I think, you know, when you're small selling to smaller businesses or even medium sized businesses, it could be a very repeatable and consistent message. You have to have a higher tolerance for variance in the enterprise because you're probably going to have some pretty unique requirements that will challenge you to think about your roadmap and be like, Does this fit in to what we're trying to build?
00;13;23;16 - 00;13;47;18
John Jahnke
If it doesn't, do we want to do this work in order to win? Because those decisions have huge consequences. And I think, you know, I always encourage early stage founders like you want to be really true to your mission, like stay focused on your mission and find an even though there may be people that are adjacent that want to work with you or pieces and parts of what you do, solve their problems.
00;13;47;25 - 00;13;55;23
John Jahnke
Like enter those relationships with caution. So because they can they can completely change the direction of your product or in company over time.
00;13;55;23 - 00;14;17;07
Patrick Campbell
Yeah, I think you said something interesting there that kind of ties back to the tackle part that we were talking about, where I think a lot of people don't realize how much like operational stuff, like a buyer at an enterprise large company has to deal with. They get like it's not just you and I sitting down and being like, you have this problem.
00;14;17;18 - 00;14;37;11
Patrick Campbell
It impacts this much. I have a proven track record of solving it. This much like you should buy it, right? That's that's just the start, right? Oh cool. The person who fits that ICP profile said yes, but they got to stick their neck out to go do this and go do that. And then procurements going to get like in the whole map of the deal.
00;14;37;11 - 00;14;53;11
Patrick Campbell
Like you can get really, really frustrating, but it's like that's how they buy. And if you can better, you know, not to do a soft sales pitch or tackle, but if you can better like align it with how they buy, then that takes an extra like speedbump off of the things I have to worry about, which I think is we're learning more and more as we go.
00;14;53;11 - 00;15;04;22
Patrick Campbell
Upmarket, like upmarket for us right now is going from, you know, $100 million companies to $300 million companies, right. That even there there's a step of like, you know, championing and really mapping deals.
00;15;04;22 - 00;15;28;28
John Jahnke
Just talking to a friend at Ford recently and he's like, you know, for us to put a new vendor into our procurement system is like a 3 to 6 month process and and whatever the product and I'm sure they can always go faster when they want to. But the process to get to your a certified vendor in this enterprise ecosystem, people always underestimate and you see deals just die because people get tired trying.
00;15;28;28 - 00;15;55;05
John Jahnke
And that's where I think if you can align with, Hey, you already spend a lot of money with this company. Yeah, this is why ecosystems are going to become such a big deal. And I think you'll see marketplaces continue to evolve and those that are really successful take more share of wallet. I think Salesforce is a great example of this where so much easier under the Salesforce umbrella to be like, okay, if I sell a plug in for Salesforce and I sell it through App Exchange because it just goes under that Salesforce contract, which.
00;15;55;05 - 00;16;13;10
Patrick Campbell
Is a product person and even go to market person. You just I don't appreciate it. Like I'm always like, this is so dumb. Like, I understand like why it is, but it's like we need to like go through this whole thing and it's like, yeah, because they want to stamp like imagine, I don't know how it is a tackle, but I can just imagine that commerce conversation with our CPO.
00;16;13;10 - 00;16;29;00
Patrick Campbell
Like, why do we need to build this? Oh well, because they need the stamp and they want the like custom terms and stuff. Why can't they just use our terms? It's an interesting value prop that I don't think is appreciated as much until you have someone like you or like similar who's like sold this type of stuff to those types of buyers before.
00;16;29;10 - 00;16;35;03
Patrick Campbell
Who knows? Like, listen, I've seen this enough times. I know that it's not going to go through unless we're in this sort of marketplace or something like that.
00;16;35;03 - 00;16;53;22
John Jahnke
So I think the in the SaaS ecosystem, you're seeing more and more builders appreciate that they can buy things now, like no one's going to buy it, no one's going to build authentication anymore. Five or seven years ago they would have everyone's going to use Auth0 or no one's going to build communication services. They're just going to use Twilio and no one's going to build infrastructure as a service.
00;16;53;22 - 00;16;58;00
John Jahnke
They're going to use Azure GCP and it's like you can get to these.
00;16;58;00 - 00;17;00;26
Patrick Campbell
Where they started Heroku and then go to HMS just to make it.
00;17;00;26 - 00;17;14;24
John Jahnke
To these core components to get started with so much faster. And then they, they can, you know, kind of pinpoint their value equation for their, their ideal customer.
00;17;14;24 - 00;17;35;15
Patrick Campbell
Yeah. And speaking of the value creation, I know some of your passion about capital efficiency. Yeah, that's my hard pivot. Like it's something I don't think enough people appreciate very similar to like the sales process we were just talking about. Tell us a little bit about like what is capital efficiency? It's a little obvious, but like hopefully you can explain and then also like why is it so important and what what are people missing?
00;17;35;15 - 00;17;37;19
Patrick Campbell
We can go and build a framework from there. Yeah.
00;17;38;05 - 00;18;00;13
John Jahnke
Capital efficiency to me is like, how much capital do you need to take in order to build a company? And it has a lot of different definitions, but we always use the burn multiple. Like how much money do you have to burn in order to generate? RR Because it's like the convergence of all your things. That's your product, it's your sales team, it's your customer success, it's your marketing all put back together into how efficiently are people receiving that.
00;18;00;17 - 00;18;21;21
John Jahnke
And for us, like we grew up in, you know, we spent Brian doing I spent time in startups that were extremely well funded and took some growth at all costs. Yeah. Past where okay, we're going to go add 50 salespeople. Everyone gets $1,000,000 quota. We should do $50 million in RR, and it doesn't quite work that way. And it does.
00;18;21;22 - 00;18;43;22
John Jahnke
Yeah, right. It's like I actually am giving a talk tomorrow, and one of the topics is like the growth formula is simple ish, like sales person times, quota times, restricted production and sprinkle some marketing on it should just work. And that's not how it works at all. It's yeah, so you're trying to trying to look at that and decompose it down into, you know what I like the nail it and scale it philosophy.
00;18;43;22 - 00;18;53;28
John Jahnke
How do you get to nailing the initial value proposition as fast and efficiently as possible and then scaling once you understand the unit economics scale?
00;18;53;29 - 00;19;16;04
Patrick Campbell
I think the thing that with capital efficiency is a lot of times like the inputs into the formula can get a little complicated, right? Because, you know, you can obviously look at last 3 to 6 months, but there's always that sales leader who's like, Yeah, but if we improve this number by like this amount, you know, this will change and you're making decisions off of some of that murky fuels, data driven, you know, capital efficiency should obviously be a focus.
00;19;16;04 - 00;19;20;28
Patrick Campbell
But if I'm just starting off like I'm like, oh, I need to get a better focus. Like where do you recommend people start?
00;19;21;13 - 00;19;51;11
John Jahnke
Yeah, I think so. Much like we would decompose the problem into like, what's the minimum viable team that we need in order to pursue some sort of goal and, you know, for us end up being a combination of customer count and. RR It's like, okay, our first our first team was three people. How could we get to some form of product, some understanding around the value equation of that and get to our first ten customers and be like, okay, we now understand how to make it repeatable from 10 to 100.
00;19;51;11 - 00;20;07;16
John Jahnke
And if we can go from 10 to 100 and we can increase our RR by five times and, you know, understand how that trickles down into your sales force, what kind of salesperson you need, your customer success team, how much time does it take to support them, your marketing team, What kind of how do you want to even start?
00;20;07;16 - 00;20;23;15
John Jahnke
Do you want to start with Ushio? Do you want to start with content? Do you want to start with account based marketing guys? Because you can't do everything. And I think the the thing a lot of people who end up not being capital efficient do is they try to do all the things that you'll do at say, 10 million an RR plus right away.
00;20;23;22 - 00;20;45;07
John Jahnke
And you're saying you don't have enough money or resources to do that? Well, so we tried it. We always decomposed it down that way. And that's what I always encourage people to think about. And so much like the the milestone of $1,000,000 in RR and SaaS is such a huge point. Get to a million in RR and things start to happen and then you're going to feel like you're behind until you're 10 million in RR when the cavalry will come.
00;20;45;14 - 00;21;08;27
Patrick Campbell
Yeah, well, then you're also going to feel I mean, we when we had ten, it was a very weird feeling of like, Oh, we have a lot of fronts we're fighting like, and that's where, like even if you focus on that 002112 ten, I mean, we're bootstrapped and so that's that throws the wrench into it where it's like, you know if you that's why we're probably going to raise money pretty soon because we're just like, now we're fighting these fronts.
00;21;08;27 - 00;21;31;27
Patrick Campbell
And also we know where their efficiency would come from, where some of those inputs, at least from a like growth standpoint, we were guessing or like didn't have enough data on. So I noticed that a lot of people just aren't professional with like they know their burn like and they know where they're headed. Do you think it's like setting the goal and then figuring out the team, or is it like this is the amount of resource I can get and therefore, like it's a chicken or the egg, right?
00;21;31;28 - 00;21;33;02
Patrick Campbell
Like, where do you think that comes through?
00;21;33;09 - 00;21;48;24
John Jahnke
Right? I mean, we always would set the goal and then work our way back to the team. What do we need to go to? Does that solve like can? And then how can we break that down? Like how could we do it with less at a point in time and then you get to the point where you're like, How do we get owners for everything?
00;21;48;24 - 00;22;03;10
John Jahnke
And how do we make sure we have enough and how do we understand the components of have to scale up? I don't know. It's just maybe the way my brain worked. I always thought in like a multi year planning base where if we want to get to, you know, 500 K this year and 5 million next year and.
00;22;03;26 - 00;22;04;07
Patrick Campbell
50.
00;22;04;07 - 00;22;22;07
John Jahnke
Million, the year after, like what? How do we like at least come up with some scenarios? Sure. Gut check and then just constantly test them. We set our goals for three years and really no idea how we were going to accomplish that, but went through that exercise as a founding team. And it's amazing looking back how close we were.
00;22;23;06 - 00;22;45;19
Patrick Campbell
Yeah, I think it's because a lot of times it's like your ironically, your gut is like, Oh, I know we can get there. When you think about like your planning cycles now, like what does that look like? Are you already planning next year? Do you have it in that plan? Is loosely done the year before for this next year.
00;22;45;19 - 00;22;46;16
Patrick Campbell
Like how does that work?
00;22;46;16 - 00;23;08;23
John Jahnke
Right. Yeah, we I mean, we've always had what we think our, our, our target for next year will be that's, that's been defined for some time. Yeah. Now we're in the point where we had an original like we built our 2022 had come plan early in 2021 because it's like you can't just build a 21 plan. You have to think about how it connects to the 22 plan, but then you're constantly validating that and it, you know, we invest.
00;23;08;27 - 00;23;11;03
Patrick Campbell
It just saying like, yeah, yeah, real, actual.
00;23;11;07 - 00;23;29;27
John Jahnke
We invest in the strength and we've always kind of built the conservative, the aggressive and then the middle plan. And we always set our headcount target at the middle plans that are our target at the aggressive plan. And then as we're having success, invest towards aggressive. So you just increase the pace of your hiring. And this year we started with a plan to have 100 people.
00;23;30;08 - 00;23;42;12
John Jahnke
Then we ended up doing our B early and now plan 1 to 130 people. And I think we'll exit this year at 160 people. It's just because we're seeing strength and the unit economics makes sense. So we want to continue to nail what's working.
00;23;42;12 - 00;24;03;26
Patrick Campbell
I guess the question is for a lot of folks is like you have your historical data, right? But then sometimes depending on where you are, like if you're before the like invest the dollar, get three out, you know, and your invest a dollar, get 1 to 6 out. You know, when you're at that point, the historical data can sometimes be unreliable and then you're doing future future proofing with like a lot of assumptions, right?
00;24;04;02 - 00;24;24;13
Patrick Campbell
How do you structure that to that? It's not like we've had years, thankfully not as recent, but like we've had years where it was like, well, that we just did Q1 completely different and we kind of just completely abandoned everything we had like reshuffle, right? And that's like I know that's coming from some sort of like failure somewhere, but like, where do you come from?
00;24;24;13 - 00;24;38;29
John Jahnke
Yeah, it's I we've, we've been fortunate that, you know, we kind of got to a definition of ideal customer profile and then the mistake I hear from a lot of people is they overestimate the market, like, oh, our TAM is $5 billion and there's.
00;24;39;03 - 00;24;40;26
Patrick Campbell
That's like a million players.
00;24;40;26 - 00;24;48;11
John Jahnke
Yeah. Having your board plan B separate from your capital plan. Yeah. You want to, you want to put the hard it's.
00;24;48;11 - 00;24;48;27
Patrick Campbell
Dangerous.
00;24;49;05 - 00;25;11;19
John Jahnke
On your plan. Like what is this really. I'm signing up to the board to do this. I mean, board meetings are hard when you say you're going to do something and you don't do it. So you want to make sure what you're signing up for you and your entire leadership team have absolute confidence you can do, and then you can always expand like everyone, like it's a good story when you're always exceeding plan because you take a really hard and.
00;25;11;25 - 00;25;27;27
Patrick Campbell
The plan is a bit in your control. So you can put your we always put like our mid non-aggressive plan is always our board goal, right? Like that's kind of how we structure it. And thankfully there, there have been more years now than not where it's like we're actually trending towards aggressive, you know, And so you know, it's always helpful.
00;25;28;05 - 00;25;50;23
Patrick Campbell
But the ideal customer profile thing I think is really interesting because I think people start it's a real struggle because people start planning to aggressively I think sometimes when they don't have enough information and then every conversion number or percentages compounds the problem of planning. So it's like, Oh, we think we can convert these leads at this rate.
00;25;51;03 - 00;26;07;17
Patrick Campbell
We think this is going to be the R poor LTV, and then all of a sudden you're running into something where it's like, well, three all three of those assumptions are off by a certain percentage. You just have this giant swing plan actual and like always keeping that a central, like it sounds like capital efficiency and planning is very, very central to everything.
00;26;07;28 - 00;26;16;03
Patrick Campbell
And therefore like you can just constantly like vector that plan so that it just improves over time and you don't get these unrealistic like looks at things.
00;26;16;08 - 00;26;37;10
John Jahnke
I think especially in the you learn so much in the early days and I think I think a lot of people also in that 0 to $1000000 phase aren't one thing. They're like five different things that they experimented with. But like getting to that repeatable thing because that's the only way this planning model works, because your unit economics assumptions only work when you're doing one thing.
00;26;37;10 - 00;26;46;01
John Jahnke
If there are five separate things, you have to make five separate unit economics assumptions. And I don't think like a lot of companies succeed being too many things too early.
00;26;46;05 - 00;27;18;10
Patrick Campbell
And this is that that's been our problem too, where I think the other thing that we did and this was the nature of bootstrapping with a free product, which I don't recommend to most people, is we didn't have enough reps to understand like where the repeatability was and then all of a sudden you get enough reps, you start kind of dedicating towards a plan like it's a bit of a self-fulfilling prophecy, where then you could start to project and extrapolate out, which I think to many people like because they're raising cash and, you know, they have to put together this fake plan and then they, you know, set themselves up for failure by not doing
00;27;18;19 - 00;27;22;19
Patrick Campbell
the real actual and then basically making the algorithm better over time, which is interesting.
00;27;22;26 - 00;27;43;21
John Jahnke
I think trying to scale your go to market before you're ready is probably the number one mistake of not capital efficient companies because you end up burning through, you burn and you hire people with the best intentions. They're not able to be successful. They end up leaving you or you end up firing them and you start over. And you have to do that with leadership and salespeople and all supporting infrastructure.
00;27;43;21 - 00;27;45;16
John Jahnke
That is unbelievably expensive.
00;27;45;16 - 00;28;00;07
Patrick Campbell
I really like I don't know if you know, Mark or bearish. I mean, you probably heard of them at some point. States choose to go to market and what most people do is they start to do the go to market too early and they're still finding that product market fit. And then the result is is basically exactly like you said, is all over the place.
00;28;00;07 - 00;28;08;25
Patrick Campbell
The hire, the 50 reps, the 50 reps all have to get fired because the demand hasn't been figured out. The product market fit hasn't been figured out yet and just gets, you know, dramatic until.
00;28;08;25 - 00;28;19;18
John Jahnke
You end up with a sales driven product backlog because sellers are trying to create ways to make their numbers, which then turn into commitments to customers that you may or may not want to live up to.
00;28;19;18 - 00;28;42;17
Patrick Campbell
It's very old school. It's like I think when you did this in SaaS 2.0, which was like late nineties to about 2010, 2015, that was fine. Like, I mean New Relic Joint Customer, right? Like their first phase was literally just buy the market, go do it. And I know, you know, some of the reps that were in the early stage it was like, you know you had a 700 person company and 450 of them were all salespeople.
00;28;42;29 - 00;29;03;00
Patrick Campbell
And I just remember one of the former product leaders, you know, he was like, Yeah, I was like energy like. And he came in to like kind of like, you know, do it. But that was kind of the right way to build things back then. But now I think it's there's enough FUD in the market and there's enough density that like you kind of have to be a little bit more like pinpointed, you know, and capital efficient, you know, that type of thing.
00;29;03;12 - 00;29;11;00
John Jahnke
Sarah Where like a spreadsheet inside of a vertical company, it could be $1,000,000,000 SaaS product. It's out there like.
00;29;11;03 - 00;29;14;17
Patrick Campbell
Oftentimes a literal spreadsheet, like a table or something like that.
00;29;14;17 - 00;29;37;00
John Jahnke
Yeah. So it's, I think there's so many markets that are barely understood and there's so much waste and inefficiency inside of most verticals that like we're we're just at the earliest days of the quantity of software companies. And even the more specific the market, the easier it is to be repeatable.
00;29;37;00 - 00;29;52;06
Patrick Campbell
Would you recommend like stacking So let's say your product, I presume your product, but maybe more of it, let's say a generic SaaS product could be sold to like three different verticals in the plan or those three different verticals, three different sets of line items basically.
00;29;52;12 - 00;30;13;06
John Jahnke
So we I mean, it's interesting because we look at software and I don't I haven't come up with a way to describe software as a horizontal vertical because software is in every vertical. It kind of spans its own industry segment. So for us, we don't actually track the vertical markets that way. We track company our customers because they're all software companies by state.
00;30;13;07 - 00;30;28;12
John Jahnke
So it's you have the kind of seed and Series A startups who, you know, are trying to figure out their go to market for us. Our customers are successful when they sell through the clouds and those early companies, some of them won't succeed. So the metrics associated with the business may be very different.
00;30;28;12 - 00;30;29;03
Patrick Campbell
So you break those out.
00;30;29;03 - 00;30;30;13
John Jahnke
Then three.
00;30;30;13 - 00;30;31;23
Patrick Campbell
Stages to these types of.
00;30;31;23 - 00;30;39;10
John Jahnke
Deals we have like the growth stage companies in the middle, Series B and Up who are all investing significantly in scale and go to market. Then we have the top 100 who are.
00;30;39;12 - 00;30;47;22
Patrick Campbell
So your planning basically takes those three segments into account and then you're basically planning like this many of this this quarter such.
00;30;47;22 - 00;30;56;29
John Jahnke
And so we have different metrics by segment, we have different teams by segment, we expect different customer journeys by segment. They're all under that one umbrella of software.
00;30;56;29 - 00;31;01;29
Patrick Campbell
Just imagining you every time you walk in. It's like Minority Report with a spreadsheet.
00;31;01;29 - 00;31;12;03
John Jahnke
I was talking to someone from Shopify and he's like, Hey, the faster you can get to 100% dashboard driven, like, like meetings should be dashboards. And I'm like, I dream of the day.
00;31;12;03 - 00;31;41;18
Patrick Campbell
They're right now of like or multiproduct, but not like necessarily that disparate of teams. I finally took everything from. We had a separate board deck, you know, spreadsheet. We had a separate revenue meeting spreadsheet just started merging everything. Like just it's like, cool, it needs to be in here, doesn't exist. And like you said, as soon as it can get into the end, I know I'm going to get 3 to 350 out and as much as I can do is, is the game, you know, as much as dashboards as possible.
00;31;41;18 - 00;31;56;26
Patrick Campbell
Shopify is Shopify, though. So it's a little, little hard to learn sometimes from those types of companies. What do you have any like if someone want to learn more about this, I don't know if you've published anything externally about this, but like or they want to find like great templates. Like, do you have a suggestion or now.
00;31;56;26 - 00;31;58;16
John Jahnke
Like Nicole's with us and she.
00;31;58;19 - 00;31;59;15
Patrick Campbell
You're going to be this guy.
00;31;59;16 - 00;32;15;02
John Jahnke
And now she, she she knows is a topic I'm passionate about. I've given talks on it before, but I have like this three part blog series I've wanted to release that. I just haven't had time to finish. So And no, there's a buffalo startup. We talk where I talk about capital efficiency and hypergrowth. Under the Buffalo.
00;32;15;02 - 00;32;16;24
Patrick Campbell
Startup, we search your name in Buffalo.
00;32;16;24 - 00;32;31;07
John Jahnke
I started it's a talk I actually gave with Mike Droz, who's our partner from Bessemer. He's on our board and we talked about the kind of two personas like, I want to build capital efficient hypergrowth. And he talked about it from a venture capital standpoint, that's great. I look for since I was the last decent talk, I.
00;32;31;07 - 00;32;37;05
Patrick Campbell
Guess it sounds like a great resource. Yeah. LISBON Great, man. Yeah, we're good people. Find you anything you want to plug? Yeah.
00;32;37;05 - 00;32;47;26
John Jahnke
You can find us on tackle that I o If you want to learn more about cloud marketplaces or anything digital selling and you can find me on LinkedIn and Twitter, I tend to talk about most of these topics in both of those places.
00;32;47;26 - 00;32;48;27
Patrick Campbell
So awesome.
00;32;49;00 - 00;32;53;08
John Jahnke
Appreciate it. Appreciate it. Yeah, great job.
00;32;53;08 - 00;33;20;20
Patrick Campbell
A huge shout out to John for doing the podcast. Now you have what it takes to manage capital both effectively and efficiently. Today we talked about market integration, the baseline of effective selling, the framework of capital efficiency, calibrating planning cycles and insights on product stacking. Oh, and if you want to support profit well and the show, we'd appreciate it if you've left a good five star review of the podcast or the equivalent rating wherever you listen or watch the podcast, Gods tend to like that sort of thing.
00;33;20;20 - 00;33;38;16
Patrick Campbell
And hey, we like to appease the podcast gods. Thanks for listening. Make sure you subscribe to and tell your friends about Protect the Hustle. A podcast from Prophet will Recur the largest, fastest growing media network dedicated to the world of subscriptions.
