Hustling a 100k domain, the pitfalls of funding and running a remote team on trust - With Dennis @Convert.com

On this first episode, we chat with founder of Convert.com, Dennis van der Heijden about his 10-year journey from securing Silicon Valley funding to leading a fully remote team on trust.

What else we cover: 
- why funding can be helpful but also hurtful when you're starting a business
- how to encode autonomy and purpose alignment into your company's DNA
- why his current title is Head of Global Happines

Links >>
Upraw media: https://uprawmedia.com/
Episode transcript: https://uprawmedia.com/blog/trust-convert-com

If you are keen to know more about Upraw Media or be a Masters of SaaS guest speaker, visit uprawmedia.com or DM us on LinkedIn. We are also on Youtube if you'd like to put a face to the names and voices of the best in SaaS. Thanks for tuning in!

Transcript

Todd: Hey guys, welcome to the masters of Saas podcast brought to you by Upraw media – a growth marketing agency for SaaS, specialising in paid media content and conversion rate optimisation. I’ll be your host, Todd Chambers.

I have the absolute pleasure of chatting with really smart people from the SaaS industry. The goal is to extract as much value as possible. What are their strategies, the tactics, the failures, funny stories, key learnings? All of this can then be used to help you grow and scale your own SaaS business.

In this episode, I speak with Dennis Van der Heijden. He’s a Dutch entrepreneur and founder of Convert.com, which is an A/B testing tool that helps companies run experiments, increase conversions, and, ultimately, revenue.

Convert is a fully remote 40-person team spread across many different countries. We dig into Dennis’s 10-year journey with Convert.com, which was far from linear success. Dennis openly discusses his failures, including how his goal to secure Silicon Valley funding led him down the wrong path. He burned through his first round of funding with very limited progress. Subsequently, he had to let the entire team go, take stock, and pretty much start again.

I was curious about how Dennis secured a 100k domain, Convert.com, but extremely limited resources. The answer really shows that Dennis is a true entrepreneur; he had to use hustle and ingenuity.

Dennis is also a huge fan of remote working, so I wanted to drill in and find out how he manages his team across so many different countries. We discussed holacracy, which provides a concrete framework for encoding autonomy, agility, and purpose alignment into your organisation’s DNA. It was a really, really great conversation on a Friday afternoon. I hope you guys enjoy it. So let’s jump straight into it.

Turning a product into a company

Todd: Dennis, welcome to the show!

Dennis: Thank you.

Todd: Maybe we can start off (by people who don’t know you) with Convert, and how the company started.

Dennis: Okay, I am Dennis Van der Heijden. I’m CEO and Chief Happiness at Convert. I am doing this for 12 years, I think because I do count to the inception moment and 2008 as years. I think that was the moment where, like, many people were in crisis, and that’s where the company’s idea was founded. Right now, I run a remote team of almost 40 people in the A/B testing space.

Todd: How were the early days? It was quite some time ago when you first created Convert. Was it called Reach back then?

Dennis: You’re the first one that pronounced it well, and that’s why we changed names.

Todd: Was it spelt in a strange way, or?

Dennis: Yeah, it was like Re-edge, and I’m not a native English speaker”. And so I didn’t really realise that that’s never was going to fly.

Todd: So how did the initial version of Reach actually get started? Why did you build the product?

Dennis: The product was based on a problem. In 2008 I was running a lead generation site in the Netherlands, actually around 200 websites. Basically, multiple domains where you could search for ERP software or CRM software or whatever your business needed.

At that time, you would come to one of those side written articles or maybe did a product search. We would try and sell you a free box with content and books and folders about topics that fit you and that basically means you have to give half an hour of your time via an interview and based on that we sold your project as lead to multiple vendors. And you’ve got a free box with lots of books about ERP and have the folders that fit your demand, and it was really interesting.

2008 was a slightly dynamic year. I wouldn’t say 2020 is any different, but in 2008 we had the financial crisis. And I mean, that meant for most people in the world and us no money. It wasn’t the moment of investment, let’s say. I had just moved to Mexico after launching this business in the Netherlands and I had enough income to move to be close to my family in law.

At that moment, basically, the whole economic system crashed in that sense. That means 50% of the leads, 100% of the costs in Mexico, and that meant I needed to do something really creative when we came up with a WordPress plugin that monitored the keywords that people were looking for and the content they’ve seen.

And since we had 200 domains, we could kind of connect it all together. Basically, yesterday you were searching for Microsoft CRM, a week later, you were searching for an ERP in the food industry.

We basically showed you that there was – in this box that you get for free – lots of information of Microsoft CRM and ERP in the food industry, and how that would work together for you. And that was really relevant to those people, and we basically doubled our conversion rates by building hundreds and hundreds of little content blocks and men or rules. That was the foundation for Convert.

Todd: You thought “holy sh*t, personalisation works really, really well. I need to pack this in some way. How did that transition happen? I mean, are you technical? Did you build it yourself? Did you have a co-founder, or?

Dennis: No, I have no technical skills. I’m really good at messing up somebody else’s PHP code and HTML code and then letting them fix it later, so I think I knew, but I don’t know a lot about it. But I knew it was something interesting. I knew that I wanted to do something more with it because it was really like “wow, I don’t know, what is this called?”.

It took me around a year to figure out what the competition was and what this thing was called. It turned out to be personalisation. Basically, content personalisation, based on manual rules. It is in the space of conversion optimisation, so it falls under that group.

I basically looked at the guy that was sleeping in a dorm in Romania, finishing his PhD on Computer Sciences and I was like “Hey, you build me this $50 WordPress thingy”. By that time, he was making a lot already. Basically, he had the key to our entire server infrastructure because he became kind of the CTO of that business.

I said “are you interested to take this little plugin and make it into a product, and become my co-founder? Are you interested in that idea?”And he’s like: “well, let’s think about it, let’s meet”, and next time I was in summer at my parents’ place, I flew to Romania, met the person that by that time (already 3-4 years) was running kind of my IT.

Todd: You’ve been working with him for three or four years. You never met the guy.

Dennis: I’d never met him, and basically, he invited me over to stay at his place which I found a little bit like “well, that’s a little bit too fast for that relationship”. And he and his wife were really friendly in that sense. I stayed in a small hotel for a week and we drafted up the core idea of Convert.

Grappling with the Silicon Valley game

Todd: I was listening to you on another podcast, and you were talking about funding. I believe in the early days, your main goal was to have the Silicon Valley experience and get funding and once you had that funding, you feel you’ve made it, maybe you can explain your funding journey.

Dennis: Yeah, well, the funding journey; so I ran a cash flow business, and so I know how to do that part. We were profitable, and when I flew into the US, I was basically watching TechCrunch every day, that was THE source for me. It was still an independent platform at that time, and it was the thing.

I really couldn’t believe what was going on in the US, and since I am not from the US that sounds like a really interesting journey, but there was no way I was going actually to move to the US. I had a family that was relatively close by and I think I was three hours from the border of Texas. And I drove there pretty regularly. In the beginning, I flew in, but it was evident to us: we wanted to have that kind of experience, because that’s the fun part of life, right? You can always learn.

So I knew how to build a cash flow business, which is profitable. And I was like, let’s do this differently. Let’s talk about funding and how everything was going to be hard. So that means I got to learn a lot of things, which sounds really interesting. So that’s kind of how we did that.

I flew to Silicon Valley, basically found meetings with very interesting lawyers from well-known brands. We found a lawyer, and we incorporated Delaware C Corp because there’s no other way to do that at that time. And that was kind of the start. As soon as that happened, we pulled more or less 15k (each of the founders), and we invested in going that direction.

So we flew there, we went to some conferences, but on the cheap mode, because we were still self-financed at that moment. So that means me buying a ticket to the floor of a conference, not the speaker port because it’s $1200. I was like, “no way. The floor part is $100”. So I flew to San Francisco to the floor, and I met people, and I got invited to the speaker part anyway, and I was really hustling my way through.

In the north of Mexico, where I was living, there was more and more like startup mentality. There were some us investors coming over to invest in Mexico, mostly from Utah, and the Kickstarter fund in the US wanting to set up a business over there as a VC fund, and Mexico was opening slowly for VCs.

In the beginning, there was direct capital from investors in the US, and then at a later stage, they tried to lobby for funds and other models where they could add funding to those funds.

In one of those events, I met the VC that was running it (that conference) and was like “how do I go about doing that?” I pretended not to know, and I think this is that mix of authenticity and business savviness. I read the book venture deals, which I believe is still a leading guide, almost a Bible of VC capital.

Getting acquired as a business – you got to be asked. The price is different, and the dynamic is different than when you want to get sold. And that’s the same thing for this VC, so I was very aware of how that worked.

I went into those conversations, like “I don’t know much about VC money, but tell me: how would a startup with some initial traction in the SaaS space that has a multi-billion-dollar market would get funding? What do you think: should I go to the US, or should I stay in Mexico?

I knew they were trying to set up in Mexico and they’re like, “maybe you should talk to us”. I’m like, “Oh no, I’m not ready, I think it’s just a conversation”. That game, especially in the Latin American community, at that time, ten years ago, that was kind of the way you played it. It’s very much relation-based, and of course, the analysts in those funds were the ones that needed to bring in good deals.

An incorporated Delaware C Corp in the US with proper IP documentation, that finds themselves in Mexico with some traction (we’re talking about $500 a month reoccurring revenue at that time) was just very interesting.

From that moment, it was a game of visiting and having lunch with the analyst and seeing if we could move on. And at the moment where they said, “I think you’re ready for a pitch into our committee, I’m like, “really?”

And then we did it, we did one pitch, and we got the funding of 250k and later on that extended to 400k

That was kind of how that game developed. I think it’s very much following the chapters of venture deals the way that’s described there.

Todd: Yeah, I’d be interested in getting your thoughts on venture capital, because I think over the last several years, there’s maybe been a bit of a mindset shift, and people are starting to question the system.

In my experience working with SaaS founders who are looking to grow, they receive funding, and really, their primary goal is to get to the next round. So their focus is on hitting those growth metrics that the venture capitalist wants, as opposed to maybe focusing on the actual business and what’s important and delivering something that customers will love. So I’d be interested in getting your thoughts on that.

Dennis: Well, that is what I learned along the way. It is – as soon as you close your round – it is setting yourself up for the next round. It is asking the question: “what does this group of investors, or the next one, need to see the milestones to get to the next round?”

And I won’t say it’s bad or good in any way. It is just that’s the way that game works. That also leads to mismatches between what customers want and what products are offered at one point in time, it happens.

We’ve seen examples – really big ones – that are funded by SoftBank that are falling right now, because of that mismatch. There is no real market validation in that sense that customers really want this, in this format, and the money is there to scale. It is a little bubble that keeps itself alive because you’re just doing what the next round demands, what are the milestones you need to hit.

But for us, it’s just a way to get to the next level. And it is, for me, one learning that I really value. Would I do it again? No. But that’s because I just did it, right? And so, that definitely is part of the experience of a person. So I think there’s – especially in 2010 when the tools are so cheap to build tools.

I mean, basically, you can rebuild my company’s toolset in six months if you wanted to, and then you have a product that’s paired to the leading competitor. That’s technically now possible, and so I don’t think you need funding to get there.

I think the Lean Startup model that is developed at that time when we got funding around ten years ago offers a lot of value in building your community first instead of the product. Not saying it’s the 70s of Silicon Valley where you needed capital to get even a processor on the market kind of thing. I think when I started that wasn’t the case either.

But nowadays, with a blog for writing for a year, you can get a long way in getting your first hundred or thousand customers already at the moment of launch. So the market is really different. There are a lot more methodologies to validate, and the tools are significantly cheaper.

I think you can really get ramped up really quickly to your first hundred thousand on a recurring revenue without VC money. Just following the process of lean Lean Startup methodologies is the way that you can get probably from zero to 100,000 monthly recurring revenue without funding, which allows you to take deals at way better valuations. The word “valuation” I learned along the way, I also didn’t know those things, but that’s part of the whole newbie journey.

Funding, failing and recovering

Todd: Yeah, well, often I speak to SaaS founders, and they have money because they come to us to acquire more users and they have very, very aggressive goals. I can imagine if you’re starting a SaaS company as you said, one way is just to bootstrap, and the tools, and develop so much. Now I think that’s way more possible.

It’s a pretty big decision whether you take funding or you don’t because you need to think about whether you want that pressure and that board that’s going to force you to make decisions may be that perhaps you wouldn’t take. So, yes, supercritical decision. So just to go back then.

Todd: So you were a 500 MRI, you’re in Mexico, you get funding. What’s the size of the team? And what was the kind of the next steps when the money hit the bank account.

Dennis: Team of two. So me and my co-founder, that was basically it. When the money hit the bank account, the problem started.

Todd: You had a party, you just went out for beers first off.

Dennis: I did buy myself the first Mac Air, which I think was a really, really good decision at that point. By the way, my co-founder still took ten years to get a to get that later, and he is also not going to go back. I remember I spent I think 1500 dollars of that money for MacBook Air.

What I did next was I got trapped into what the investors set was the next milestone, and I gave up a little bit of my gut feeling. And I basically went after saying, “we need some validation first”. Somehow, I wasn’t convinced that our little monster – it was a really complicated tool that time – was the thing.

My idea was that A/B testing was going to be the feature that we should focus on. And we had multiple features. We had many things at that time. I went into the process of validation, according to the book of lean startup, and we only had that book.

People must understand we didn’t have any other book. We didn’t have Ash Maurya’s Running Lean, how to implement that actual book. It was a book without really any tools, so we didn’t have any tools. We had the Lean Startup as a book to follow, but no real practical experience in a market on what that Lean Startup looked like.

So I went into interviewing people, and I did qualitative research, and basically try to quantify that if I had five people saying this, or ten people saying that, then I would say that’s true enough, and I would go in that direction.

I hired a total of eight people besides the founders, and we all moved to Mexico. So we hired locally there. And I and my co-founder moved to Mexico, and I still think that is an interesting deal.

I love remote, but I have this feeling that being all in a kind of a war room at the moment of inception is kind of really powerful. That iteration is so fast – looking over somebody else’s laptop and just pointing at things and spending anywhere between 8 and 14 hours in those rooms, I think it is really hard to beat remote. So, although I’m a massive fan for remote, and we’re all remote, I think it was critical to be that first year altogether.

The problem was that I didn’t have a lot of data. I did the quantitative customer interviews and I tried to quantify those. So basically saying, “I did so many interviews”. I wrote down every word of the interview, and I tried to map the things that they said and tried to justify they told so much of this and so much of that, so this part is more true than the other.

I think what I forgot is this is a qualitative thing. This is something to get your hunch on and ask the why’s. You cannot really translate that to a number.

And somehow I tricked myself into those numbers and the milestones of the investors and see, what you mentioned before, that’s exactly what happened. You’re going after the milestone because we were getting our funding in tranches. That means you have to hit this to get the next tranche and a transfer for people that don’t know what it is, is basically, my 250 came into 175 and 75, for example, on things like that.

So, some milestones have to be met. That means it’s basically me running out of a room, having done another five interviews and telling the three developers and the designer “now we’re going to all move to the left because the right is nonsense!”. Then basically: control-alt, delete old code and go to the left. Three days later, it was 20% to the right again, because “I’ve now learned this”.

I translated everything I heard into numbers because I think I got some peace from numbers in that sense. Also spreadsheets. I think that’s the moment where I kind of lost touch with what I wanted to be, and what I wanted the tool to be and what I wanted it to solve. And I just went for milestones and things like that.

I think we went into this almost a year left and right, building MVPs. And when on day one, I kind of had a hunch we should go for A/B testing. Basically, we blew all our money. I had nothing left. I needed to go for more money because I had to feed my family, and I put myself in a really tough spot at that time. And I took additional funding at the original valuation, which I think wasn’t even needed.

So I gave away more shares than I should have. I basically lost that connection to what I wanted to be. You know, I was like, our investors are really smart people, and so I should follow their lead a lot.

I’ve learned that their lead is really important, but that doesn’t mean I should lose myself in their milestones or their vision, because I’m still then entrepreneur that is trying to change things. So that mismatch was an expensive lesson.

I lost more shares for additional funding round at the old valuation without actually getting anywhere. So, super thankful for the investors that were willing to put in more money, but that was the moment I was like, “okay, this money, we’re going to put all on A/B testing”.

Securing a 100k domain

Todd: So you got punched in the face, you ran out of money. Did you have to let some of the team go at that point?

Dennis: I think we let go of everybody.

Todd: Okay, that’s quite conclusive, everybody.

Dennis: I think we let go of everybody and we took people on contract, and we had a clear definition of this going to be that Convert thing. So we’re almost two years in the story, and I think that’s the moment where you’re saying “okay, this is going to be an A/B testing tool, we are going to convert people from visitors to a trial” or whatever it’s going to be.

That was around the same time that I ran into the domain of Convert, and that was kind of like, it almost seems to be a fresh start again. The two of us, I think it was 2012. We contracted new developers on the development team, a UX designer and me and we started doing this again. Then we shook off that brand of reach, and we went to go and say this is Convert.com.

Todd: How did you afford Convert.com? Maybe my perception in my mind is this incredibly expensive domain. I don’t know if it is, but how did you afford that?

Dennis: 100k.

Todd: How on earth did you afford 100k?

Dennis: I didn’t. So, hustle, right? An entrepreneur has to hustle. So basically, if you want a good domain that’s taken, one is finding out who that is, who’s the owner, right? Lots of them are under “who is this”, it’s just really hard to track who was the original owner.

And eventually, I stumbled upon it, and they responded. They basically were very firm. It’s like, “we have one eight hundred convert phone number, and we have Convert.com as domain, each is 100k, I’m not giving you a cent less.

And they were converting videotapes from VHS to new formats and CDs and things like that. There was actually some business around it, and still, up to now, I think 5% of my traffic is people that want to convert some sort of metric or an old tape or something like that. So I still have that legacy crept traffic from that.

I couldn’t afford it – 100k. I didn’t have the money. So I was like, “what do I do?” The idea is there’s no loose kind of offer; they will take it. I said I would pay 100k at the moment that I have it and will rent it for 6k a month, up to five years. I will down pay 10, I will pay the rent, and I will pay 100k when I have it or the end of the contract. You keep the down payment, you keep the rent, you can still sell it.

And that’s eventually – and it was funny -in year five, I didn’t have on $1000. I was going to lose Convert.com, all the backlinks, the whole branding, everything. I basically, I think we saved up to 45k or something because by then we were kind of a cash flow company. And we’re like, “this is like, no more VC money ever came in after that last round.”

I was going to lose Convert.com, all the backlinks, the whole branding, everything. I basically, I think we saved up to 45k or something because by then we were kind of a cash flow company. And we’re like, “this is like, no more VC money ever came in after that last round.”

And I basically told him, I will – like, this was December – and we’re like, we have two weeks to kind of down payment the whole thing. I said, “I’m gonna wire 45k to your bank account”. This is somebody in the US and like, “No, no, I only want to buy check”. I’m like “no, I don’t even know how to do checks”. Anyway, I had to sort out how to do checks.

In the US, checks are still a big thing, and we basically wrote a check. I said I wanted to one more year for rent. So I’m paying to rent, and I’m giving you 45k in this check. If I don’t pay $55 by December 31, next year, then you have 40k and the rent and I still have nothing. And that next year there was like, we’re adding cash every month we’re selling, and we paid $55 at the end of December for the whole domain.

And so by that time, I think we paid 46k. Six times 6k plus 100k, for the whole domain, 136k after six years of renting it. By that time, we were doing a nice monthly recurring revenue, so we could actually afford it.

Finding customers in a crowded SaaS space

Todd: Yeah, hustle definitely paid off. It’s a great domain. So let’s just go back to – so, at this point, you realise that A/B testing is the way, you have Convert.com, you have a clear direction. How did you get customers in those early days? How did you kind of build some traction?

Dennis: In the very (I think the first four years), it was really hustling, as in – from common spamming machines that I used in the past. And, from going to trade shows a lot, like, print a lot of business cards, go to a trade show, have a chat of five minutes, leave a card at a booth.

And the one thing that really got me, I think, around 50-60 customers all at once, which was a really big deal for me at one point, was a conference. I can’t recall what it is called; I think it’s Brainstorm or something like that. It was kind of a network, and I think there still exists, of entrepreneurs that have kind of a mastermind group, with two or three levels in there.

And there’s a big group of people supporting that with a monthly subscription to have an annual kind of conference, and I think it is – specifically in the US, these kinds of networks still exist.

They had an annual event where speakers were invited to go on stage, and you had to sell something. Like, the conference was demanding that by the end, you had a product anywhere between five and 10k. And they would take a cut of 20% or something like that. So people walked into the bank had that credit card. That’s a concept I’ve never seen before. And I’m like, “but I’m a software”. But if you’re going into this, it’s almost like, like the timeshare feeling.

If you’ve ever heard about those kinds of sales it’s like, I know, it’s kind of like somebody pumps you up like “I want that” and you draw your card and you walk to the back, and you fill out your details and cha-ching and basically 5k later you’re locked into something, which is really interesting. I’ve never – I mean credit cards wasn’t even a big thing when I grew up. I think I have my first one on 25 I had the card.

And at that conference, they said, “we need a product”. I’m like “well, I do software as a service by monthly payments”. I think by that time, we had something of $69, maybe $99 and maybe $149 at that time, and they said, “no, it’s not gonna work, it needs to be higher needs to be like a significant amount of that like, we want to take 1000 bucks per person more or less”. So it’s like, okay, we’ll do six months of services for that or something like that.

And that turned into I think, an 8k package or something like that, if I’m correct it needed to be or less and that included like a year subscription to Convert. I went on stage the Sunday because it wasn’t event Friday, Saturday and Sunday and Friday and Saturday, I basically lobbied around with everybody. I almost spoke, I think to 200 people in that conference before I went live.

And I found out there were actually quite a few people – around five, six that I stumbled upon – who were already using us. So that was really awesome. Because I had a business card and I had a label, and I was a speaker. So people walk up to you because you’re slightly more famous than they are and things like that. I asked them why do they use it, how do they use it, and if I could use their side on stage. And they basically all consented to that.

I basically went on stage on Sunday and I loved it because I do like talking in front of people. I don’t mind that there were 500 people in an audience, I walked on stage and basically did a website teardown at that moment.

It basically means I got permission for people to load up their website, and I pretended to be a new customer to that website, and I would point out highly entertaining how difficult it was for me to buy from them. The benefit would be is they would get a like some feedback on that they approve that advance. So it wasn’t all that harsh.

But you’re trying to kind of basically making fun of somebody’s website for the education and entertainment for everybody. And the last part of the presentation was obviously that Convert could solve that all automatically.

Basically, destroy your credit card. We’ll do it for you. We have solved it already, and you can then use later. I think at least 50 people picked up a credit card and bought that plan. And that was like, Wow, that was a lot of money for us.

And there’s a heck of a lot of money because that’s 8000 minus the commission’s over there. That’s basically what I took home. It was a disaster for us. Like we just hate services. We really don’t like to be an agency, although I think you’re an agency. But it’s like, for us it was hell, it basically meant super communication skills that we really didn’t have.

We are like product people. It’s like we’re trying to keep people use a product and we’ll help you, but don’t influence my roadmap, that much, and we’d like to hide ourselves a little bit behind the side.

And that like 50 phone calls a week with people and progress updates, and, I mean, it was cash, we needed it. It was a great learning for us. But that really got us a lot of customers. And the funny thing is, I still found three of them in our system, and I think that must be eight years later now. They’re still paying. That seems…

Todd: Pretty good LTV.

Dennis: Exactly. They basically, I think they really enjoyed that conversation there, and they’re still there, which is fun. It was really one of the best ways to acquire customers for us. But I, the combination of consulting and SaaS is, I think many founders have this problem – you will walk into this problem at one point in time, maybe for cash flow reasons. Or maybe you’re building your SaaS.

Besides, you’re doing your agency, lots of agencies, and I think, especially in recession times are going to look at a product like how can I productise, some sort of agency model or parts of my agency. And it’s really difficult to have both at the same time, right? You’re making product choices that are not really for the benefit of all just for the cash for now. And it’s really difficult.

I think, coming back to funding, sometimes funding helps there because you can really stay true to the SaaS model if you have some money in the bank. And I think if you’re bootstrapping and I think most of our last part of Convert was bootstrapped.

We had multiple times where we were stuck on it. We had cashflow problems, and that we needed to do some sort of service model, just for maybe ten customers to be able to kind of like make payroll, and we had those moments. And they’re always very difficult, time-consuming and I think highly conflicting with the end goal that you have in mind. But sometimes you have to do what you have to do.

The principles of holacracy

Todd: So at this point, I think we’re about five years into the story. I want just to zoom ahead a little bit and focus on how you currently run the company. And I was listening to you on another podcast, and you were speaking about how previously you’d run the business using automation frameworks.

You mentioned that you’d read the E myth revisited, and you’d also read the Tim Ferriss 4-hour workweek. And that’s how you were kind of running the company. Whereas now, you’ve moved to a more trust-based autonomous system, something called holacracy. So maybe you can tell us about that.

Dennis: Yeah, if people are curious, what they’re going to be hearing here is holacracy.org. It’s an organisation that built this different management style. It is not a hierarchy. It is not complete socialism, it is something in between where people feel free and motivated, but yet to have a structure to work with.

The moment where I stumbled upon was kind of (I think founders have this) where multiple things in life just come together. For me, it was the moment where I had to think about the kind of education I wanted for my children.

And it was at home that I started feeling that maybe if my oldest daughter (I didn’t do the best job ever) and as a parent, you come to realisations. I don’t know if this whole school and then all the homework, then she’s like, people are crying because they don’t want to do the homework and this whole punishment, kind of like, I was also not a great homework person. I had multiple interests, and so I was thinking of like what is like the model I’m going to do with my kids? And we stumbled around unschooling.

Unschooling is a methodology where you’re basically saying “I trust that people will learn the things they’re interested in learning at the time, they’re ready to learn”. And, just to flash forward to kind of last week, my son was playing with a friend on a Monday after the lockdown – it was his first playdate after the lockdown.

I’m in Spain, so that was May 11. I think he played with him. Next day, he wanted to play again. I dropped him off and he said, “could you take a video?” And like, “of what?” “well, of me biking?” Like, “can you bike?”; “Yeah, I learned yesterday. I taught myself (because he has a bike with no side wheels) and I wanted to learn”. I’m like “sure!”. So I record a video, he comes from around the house, and he bikes on a bike. And he’s never learned how to bike.

So flash backward, I’m sure that children when they’re interested in something, will push themselves to learn. So I was in that mindset of trust. I was like “I actually would like to try something different with my two new children”. In the meantime, I got remarried after Mexico, and I got new, two baby children like they’re like four and six years old right now.

I wanted to try something different. I want to try and trust them with their learning. So I don’t want to put them in a school. Specifically, I don’t want to look at calendars where they need to read something at one particular age. And that was the mindset I had.

That was also the moment where I looked at my model, and I looked at it as like, I have built manuals to do content. And there’s like 55 bullet points you have to go over. And it has to have a quote, and it has to have bullets. It needs to be scannable. It needs to be this and basically, if somebody didn’t follow the bullet list, I would kind of swap them out as if they were a robot from the predecessor. So a lot of work.

So these moments came together with a TED talk that I saw about holacracy. It came that an employee that moment was “hey, can I have the credit card for $35 a month kind-of-a tool” on a Friday at 8 pm. And I was the only one that’s holding a credit card. Nobody could touch it because I wanted to control it all.

It really felt like this is not the kind of business I want to run for another ten years, this is not going to be fun. I am going to be the biggest problem and the biggest obstacle in my own company. And the only way out of that dilemma I found was copying the model of my children. Trust is still the only thing. And then you need to find a model around it.

Hierarchy and trust don’t really always work together either, because you’re not really trusting them. You need some sort of manager format. So, yeah, we wanted to experiment and since although we have investors, we don’t have that much stress from them. So they’re really flexible.

They don’t have really any power to veto things; they don’t have enough stock to kind of make my life move in a certain direction. It’s like this is worth trying. Let’s as an experimentation company run an experiment on holacracy. And holacracy really works for us. If you want to know more, I can tell you.

Building a remote team around trust

Todd: Yeah, for sure. One of the things that really interested me was – holacracy is is predicated on trust. So it’s like a prerequisite that you actually need to trust that person to be able to put them into the system.

So how do you facilitate hiring where your best case is that we can probably trust this person or do you just take a leap of faith? Give people a few months and then see how it goes? Like, how do you approach that?

Dennis: Yeah, I think some fundamental changes in my mind needed to happen. First, I think the core decision you have to make, can I trust people? By default. What is your default state? You’re walking on the street. Is your default state that you meet somebody that’s by default, not trustworthy?

Or, they should get default your trust. And that’s where the foundation of your relationships should start. How do you look at the world? And depending on the context where you’re all your culture, the location, the answer can be different.

I grew up in a very safe first world country with high education, free education, free universities. So the Netherlands was for me the base of how I formed my opinion. For me, the basic answer was, I trust people. You need to do something to make me not trust you. So that’s the opposite.

Most hiring is from the opposite direction, as in the employee should trust the company and the company by default, distrust the employee, and they have to prove themselves. That’s the model that we currently have. The company will throw as much at you to be able that you have to convince them that you’re trustworthy. In the past that used to be, did you go to a specific university?

But it’s up to you to prove that you’re trustworthy as the employee in that new company. Right now, the world is not like, can you trust the employer? How much of your previous experiences were not connected to really bad employers, really crappy companies that treated their employees really bad? Why is the model like that?

So anyway, that was a fundamental question I needed to answer. I was like if I default trust that, that means my hiring process should be very different. Basically, I would have to look at the prerequisites and invite people to convert. I would have to trust them with a lot of information first, and then they only would have to prove if their skill set fits the company, but the trust they already have.

And the skill set is: can you communicate verbally or in other formats (because we run remote) that you don’t understand the task? How long does it take for you to tell somebody else that you’ve never met, that you don’t understand what they’re saying?

For some people, and for some cultures, that is a huge thing. So by default, we trust you, period. Now, prove me that the skills that I think you have, according to the resume or however you presented your history to us, or I can find on LinkedIn is now can you put in practice we give you 90 days to put that in practice.

Demystifying the hiring process

Dennis: So before we hire you, we have three rounds of interviews. We do an interview basically on values, like, do you have the same values that we have? Check the skill level, like you said something. Then we go into the fact that we’re talking in the third interview about us like this is us. And then they have to make a decision, like okay, “I will be interested in proceeding”. Perfect.

Then we have the hiring decision. Three different people do those interviews, the values, interviews and the corporate like the corporate-style interview and things like that. Sometimes you hire two or three people, and we keep them all or not, but it’s like the 90-day period we call, you are a convert essential. You’re essential to us, but there are certain things we still hide from you. We hide from you our monthly reoccurring revenue or complete customer list. Like there are certain things that we have not yet shared with you.

Since Convert is completely transparent about everything. Once you become that core member, that means you get access to everything. You can basically lookup in our bookkeeping system, whatever we spent on things, like if you wanted to. I mean, there are too many systems too, but you could if you wanted to.

So, they basically have to prove their skillset. But the part of trust is not something we’re checking in that sense. Like, there’s no real way to check that. We don’t believe that a university-level or the name of a particular university is a guaranteed entrance to things. It just tells me that you were able to get into that particular university. How you got there: skill set, the money of your parents, it’s kind of hard to tell from the history. So (and there are so many universities) I don’t know.

We have people that work in Nigeria. Do I know what the best university is in Nigeria, and is that a qualification? I don’t know the Nigerian education system, is that all free? Like I don’t know, nor I or neither I care really. It’s like – did your history prove that you can do things?

On the interviews, I trust my colleagues to ask interesting and intelligent questions to filter out the people that can or cannot write particular content pieces. And once you made it past all those checks, what we say, is “welcome to Convert, we’re going to trust you and now prove to us that that’s okay”. So we trust you firstly, we’re paying you fully.

You’re getting 90-days contract, and anywhere in the 90 days, we can bump you out or bump you in, right? It’s kind of like on both sides. We also have people that leave and saying “this is chaos! I prefer to have a boss that tells me what to do.” Well, that’s also fine. That’s like this is not for everybody. And within those 90 days, you get a feeling of what it means to be working in this remote environment in this particular structure that is significantly less structured than a typical boss.

But I think the core element is trust. And that works in holacracy, but as well remote. Like if you are all remote and you have installed systems to check your employees remote on their productivity, it’s not really based on trust, right?

The output is that matters, it’s like, we have people still that need to do multiple check-ins per day, have their video on, that almost feels like, I think that is is not the kind of system I would feel comfortable working in. I never want to put that on any of my colleagues.

The key to maining structure

Todd: What advice would you give to companies perhaps looking to adopt holacracy? Yes, you need to focus on trust, you’ve spoken about that. But how do you also give employees direction?

Dennis: Yeah, I think holacracy – and that could be transferred to any system – it is: people do like structure. So, we, in holacracy, you don’t have a role title. You don’t have like “you are VP marketing” or something like that. That’s not what we have. We don’t have it. Any role in Convert, any converter if you look him up on LinkedIn can invent their own name, their title.

Todd: Which is awesome, by the way.

Dennis: Yeah, I’m Chief of Happiness, and there are lots of – there are people that say, “I am the director. I am Director of Operations”, and things like that. Like, I’m fine, if you think that helps your career move and it – for your particular audience – that title enables you to break down some barriers, go for it! Because the other world, maybe the VP thingy, still works. Fine for us, I don’t care. And then, inside Convert you hold roles.

Roles are small pieces of work – that could be anywhere between four and 20 hours of your time a week. They have a name, usually kind of a ridiculous name, in such a way that your identity is not too much connected to it.

Like I’m right now, filling a role for somebody that’s on maternity leave – its called privacy and security carebear. I am the carebear that basically says; we want to make sure we treat our customers well, and we treat their privacy well. We want them to live in a secure environment, and that’s one of the roles. That’s maybe a role of 10 hours, and that role has a very clear purpose. It has domains on there that nobody in Convert could touch. That’s that roles’ domain, and then it has accountabilities to execute every week or month. And you collect multiple of those roles.

Multiple of the roles I have, I think are on eight or nine right now. And like last yesterday, I had one more, and I gave it away again because somebody handed it back and I handed off against like, then you do it. And it’s very dynamic.

People accumulate rules and give them back and disappear and create new ones. And so, people don’t identify themselves all too much and all too serious with a particular job. That helps disconnect that ego part from that role. And then that structure is very clearly defined. And the way that is changed is by something called tensions. You raise a tension, which could be a difference between what is now and potentially could be in the future.

That was what we call a tension – an improvement. If the improvement is something that will not harm Convert or its purposes in any way, and there are some checks to do that, by default, people need to say yes. So, if you want to do something in Convert, and by default, it doesn’t harm our purpose or our customers, you don’t have to ask. It’s basically a yes. So it’s kind of like the movie “Yes Man”.

We say yes to everything unless it hurts. Of course, if you say yes to everything, people have problems with prioritisation. And that’s another problem that they have some structure for. So these whole roles, there’s maybe 100 roles in Convert, split over on 40 people.

One role can hold by multiple people at the same time. And at that moment, we have groups that fall where rules kind of are similar, and they’re structured more like a traditional company. There are lots of people doing sales and success kind of thing. So we group them into a circle called sales and success.

So every couple of days the organisation changes, it changes from within. Somebody sends us something. It’s like “this automated QA process for new features is not going really well. I think we should have a role that holds the accountability to make sure that always is updated. And I want to do it”.

And so people are like, “well, yeah, that makes sense. Okay, fine. How many hours Is that? Fine. Okay, what are you not going to do?”; “I’m not going to do this”. “Okay, fine. Then you’re now Automated QA wizard, fine.” You’re now automated QA wizard, you gave yourself a role, just because you wanted to make Convert a little bit better.

And so, there is structure. You can look up in the tool called GlassFrog what all the accountabilities roles and all everybody holds. So it’s really structured. It’s like an ISO kind of environment, ISO system. It is there. If it’s not there, it doesn’t exist.

That’s the single point of truth – for people in analytics, that might be your Google Analytics. For us, it’s GlassFrog. If it’s not there, if it’s not documented there, that means it is not accountability that you hold, then you can’t do it or, by default actually can, but you have to document it. Anyway.

So there’s a structure in chaos. And that’s our holacracy system with roles, and domains, and accountabilities and circles, but super dynamic. I wouldn’t be able to tell you now, what Convert looks like at this moment, because rules may have just disappeared in circles that are not monitoring. And there are people that I know that we’re hiring because I have a role, it’s called legal signer. I sign some contracts and know we’re hiring people, but I have no idea for what role. I have the legal responsibility to sign things, and I have to trust that the whole system in place checks that we had the budget, checks that it was needed.

If somebody somewhere in Convert wants to hire people, go for it! I don’t care. It doesn’t matter to me because we hire in 10 hours and 20 hours or 25 hours, people need 40 hours, people from 40 hours just went back to 28. Because they’re busy in life and we need to hire another person. It is so dynamic that, at this moment approximately, we have 40 people. I have no idea how many hours people work. I know what our EBITDA margin is. And that’s all I care about.

You can push the operational cost up to that margin. And for the rest, I don’t care if it’s people or software, whatever. Like I have to look at LinkedIn like “ah, it’s like we’re growing!” and like I know we’re signing but the termination of people; I’m not involved in their like, go and leave, and maybe they’re like on another contract or their hours reduced to five, and maybe they increased hours.

Like all that thing that I don’t know that happening in my own company, I would have to track GlassFrog to see what my company at this moment looks like.

The value of a diverse workplace

Todd: So my, my closing question would be around values. And does the system work only if there are some overarching mission values? Like how do you how does that fit into the holacracy system?

Dennis: Holacracy doesn’t define things like salary or values or how payroll or finances work, so that’s outside of holacracy. You have to think about how to do work. And it’s really difficult because as you can imagine, the company dynamic; budgets don’t work for us because people just disappeared from a circle and roles disappeared and people got hired. So the budget should be massively dynamic and like it’s tough.

So basically, I said, well, let’s stop doing budgets. Don’t spend more than this percentage of our revenue, and we’re all good. And so for the rest, Finance will sort it out to keep that margin. And for the rest values in the core, it’s the founders, like what values do you as founders lay on the foundation?

In a way, it’s a little bit like I think the US and I don’t know all the details about their politic political system. But I now they started with a Constitution, and holacracy has a Constitution.

So we at Convert, run Convert on a Constitution. That means the holacracy Constitution, version four defines the way we run Convert. They are all updated, and new versions come out and you either adopt those or not. And then your values are kind of the mix of that.

You start with your Convert as the founder values. This is like “I say yesterday and no to that”. Then some people join the company. I’ve documented that on the Convert blog on how we multiple times said no to 100k kind of customers.

It is – and I think a good example would be this: the values come from the founders in the core. Then every employee puts a new layer on top of that. And I think that’s what happens in countries like the US and every state. The law is dynamic, so the values are dynamic as well. They need new interpretations of things.

What was there in the 70s has been modified to the more recent version of whatever that country feels its value is. And you use a legal system for that. The legal system, kind of like says yes or no to whatever complaint comes up with yes and no. There is a slight change of interpretation of the law, and so the country’s values and interpretations move with time.

And so that is what happens at Convert as well. The values are cloud, user mind, and we are the founders. On top of that, we have new team members that join.

Each time they join and have a conflict with a customer – that means they’ve raised a, we have conscious business tension, we have a role that is called conscious business. And this person says, “I have a problem with this lead”. Usually, it’s in the lead phase, and we identify a lead.

The people that are doing the demos, people that do lead qualification, sales and support, they are usually the first that identify this kind of new companies in the funnel.

We had one yesterday where, for example, one of the people that did the demo said “I found an article on the blog of this company, where, based on an evaluation that they did a review on a movie, they talked about the gay moment in the movie. And I would like to bring up this company as a potential investigation for a conscious business”. Like, is this company conflicting with some values that we have?

Our values are on our site, and it’s the customers that we say yes to or no to. And then this person brings up attention. We had one yesterday; it was passed as in “this is not a big deal”; respectful how they did that.

They’re very different values, then that particular gay moment, but they’re saying, the world is like that. We’re all like different. And we hold these values, and those are these values. This is how you can explain it to your kids. And that was done well. So we said, Yeah, sure come become a customer.

But we had other customers, and it’s usually in things like guns, for example. And hunting. And it becomes an issue maybe with gambling and porn. Those two we have found as in saying that’s not harming in any way to values that we currently have.

We do have members for example of Convert, that don’t want to support us as customers and the support tickets and then redirect it to others saying, “I don’t want to watch that on my screen all the time when I’m doing support”. So we’re fine with that.

As a company, as a person, you can still opt-out to that kind of support questions. And we had other members of Convert that were working for us for two weeks, and they said, “do you know that organisation that is in the funnel? They’re harming such a large group of the world in such a way that’s hard for me to ever work at a company where they would be a customer.

And we went through the same exercise. And for us, it doesn’t matter if our team members have been with us for two weeks or five years. If they have tension around that, we should bring it up. And we should talk about it.

Basically what everybody does is like: let’s go. Let’s search for the founders. Let’s search for the articles about that. Are there any reviews about that? How is that topic discussed? And in this case, that that new team member, we supported her and saying yeah, we also think that this is not an excellent fitting customer for us. And we are terminating their trial.

This is difficult, especially for people in the US. There are a lot of difficult situations there because of all equal rights and things like that. But in the end, we chose that our team members are the ones that need to be happy. And that’s kind of odd for a SaaS company because you always say “oh, your customers are the ones you need to make happy”.

But we chose that saying; we choose that our team members should be why Convert exists. And based on that, if our team is happy they can do the best thing for our customers. And if team members are not happy, we can either support them or let them go, right? Whatever is the choice of that, or they can go themselves. But if we say we’re supporting you, that means we’re supporting you.

That means your values become our values, and then those values are transcribed into a format and then put on the site and each trial that goes in, basically has to accept our conscious business policy. It says “these kinds of businesses we don’t support”.

I’m sure hunting is important in the zone where you are and stuff like that. We just don’t want to support customers that sell guns or maybe have dolphins in their hotel, maybe that’s our choice. And yes, we’re respecting that. So go to the competition, but we don’t want to help a company grow, because that’s what you do with Convert. You help them grow in an area where values are misaligned. And so you cannot by us.

And so I think it’s a difficult discussion. Because, like, why you do porn and why you do gambling and why no guns? And that is difficult, but basically, it’s like, you know, convertors are family. In our family, these are of the values, and you can say we’re completely nuts. Fine. We just like to keep our values in that way.

Some people have very different values, which could be my friends, they hold different values. But we don’t share that part. And as a business, we’d like to work in a world – and maybe it’s our little mini version, little bubble – where we want to contribute to that version of the world. If your version of the world is slightly different, that’s also good. And this is always difficult, I’m sure.

If you’re getting the size of Google and do no evil, this is even harder, because you’re attacked from left and right. And I’m sure if people hear this podcast – this is a sensitive topic to people – I think a company has the power to express the value of founders. On top of that, you layer the benefits of your employees, and then you have the right – and I think you should then defend those values in the world.

Like if you see some injustice, whatever you consider injustice and a company as Pearson, you can then express that. I am against that because I think companies are more and more behaving like people. As in do we want to harm the world?

Like, if all converters are trying to minimise waste, and trying to switch to eco-cars, and do composting maybe, maybe Convert does that, because it’s a representation of where we’d like to see the world go. So we compensate our carbon 15 times. We overcompensate. We’re already carbon neutral. We’re buying trees, and whatever we do and saying, yeah, this is the world we’d like to shape and create.

As a company, you also have to say no and yes to things with your money and your voice. You have a compelling way of contributing to whatever value you think should exist in the world. And mine is different than yours, the other side of this podcast. But I think you have a really powerful tool as a SaaS founder and so as an employee in a company to express your values in the world.

Todd: That was a really good way to end the podcast. Thank you so much for your time, and I guess people can find you a Convert.com. Is there anything else you want to share? Can people get in touch in different ways?

Dennis: Yeah, you can just email me at Dennis at Convert.com, do a reference to this podcast. It makes it easier to kind of like avoid the spam filters or get you out of the spam folder and back into my inbox.

Or you can find Dennis with a combination of Convert on LinkedIn. I do also love those little mini introductions saying where you heard this and if I can help anybody in the world with maybe some personal advice about holacracy. If you’re curious about remote or why I think trust works and perhaps you don’t, I’m open to those discussions and even on phone calls, if people want to have that.

Todd: Thank you so much, and yeah, enjoy your Friday evening with your son and have a great weekend!

Dennis: Thank you, Todd.

Todd: Thanks for listening to the podcast, guys. If you want to get links to any of the resources we discussed in the interview, head over to Uprawmedia.com/saas-podcast. Until next time, take it easy.