Learn How to scale $100 million ARR SaaS? | Startup Business Podcast

Summary

In this Startup Business Podcast, learn how to scale a $100 million ARR SaaS company using strategies like founder-led sales and b2b vs b2c saas models. Expert insights from leaders in the industry!This podcast episode also dives a packed with valuable insights for founders starting their entrepreneurial journey. Mudassir sits down with Kevin Van Gundy, a seasoned tech industry veteran with experience at Neo4j, Trey, and Vercel. Uncover strategies for crafting winning pricing models. Understand the importance of segmentation, catering to different customer needs, and the potential of enterprise packages. Keep it simple and focus on clarity for easy customer understanding.

Takeaways

1Leadership and mentorship play a crucial role in personal and professional growth.
2. Startups go through different phases, and it's important to adapt and learn from each stage.
3. SaaS pricing requires iteration and flexibility, and it's important to prioritize goals and understand the market. Differentiate your pricing models based on the needs and buying motions of different customer segments.
4. Consider offering enterprise packages for B2B products to cater to larger companies and drive higher average contract values.
5. Simplify your pricing model to make it intuitive and easy for customers to understand and forecast costs.
6. Product-led growth and sales-led growth are both valuable approaches, and the choice depends on the nature of your product and target market.
7. Scale is not just about revenue growth; it involves managing complexity in various aspects of the business.
8. When building a go-to-market strategy, founders should be willing to engage in founder-led sales to gain valuable experience and build important communication and leadership skills.
9. B2C SaaS is more challenging than B2B SaaS due to the randomness and unpredictability of the market.

Chapters

00:00 Trailer
02:07 Sponsored
03:20 Kevin Van Gundy's Journey in the Tech Industry
09:40 Lessons Learned from Neo4j, Trey, and Vercel
21:30 Differentiating Pricing Models
29:40 B2B Products and Enterprise Packages
32:40 The Complexity of Pricing
38:45 What to Include and Exclude in Pricing
47:00 Understanding Scale
51:10 Building a Go-To-Market Strategy
56:00 The Challenge of B2C vs. B2B SaaS
59:45 Maintaining Culture as a Company Scales
01:05:00 The Blueprint for Starting a B2B SaaS Business
01:16:11 Ritual
01:18:12 Conclusion

Connect with Mudassir

🎥 YouTube Channel - @prodcircleHQ
🐦 Twitter - https://twitter.com/ProdcircleHQ
📸 Instagram - https://instagram.com/prodcirclehq
💻 Website - https://prodcircle.com/
👥 Linkedin - https://www.linkedin.com/in/mudassir-mustafa/

Transcript

Mudassir (00:00.485)
five times. At least five times in RTS. Get it out.

Kevin Van Gundy (00:04.395)
And I don't know if you feel this way as well, but especially when I have to listen to myself again and again and again, and you're like, oh, who is this idiot that I'm having to listen to? Oh.

Mudassir (00:09.502)
Oh you hate your voice.

Mudassir (00:14.393)
Yeah, yeah, I know I know so I listen to so whenever my part come I just kind of just skip it Or I just you know, listen it like a three X or something like that You know, I'm just like blabbering and then okay, I just literally don't want to hear my own voice again It feels so like yeah, you're the smartest. Yeah, just skip that That kind of thing. Okay

Kevin Van Gundy (00:26.75)
Oh man.

Kevin Van Gundy (00:31.222)
Yeah, right. I will plug a product that I've been using for all of our publishing and that sort of stuff. It's called Descript where it allows me to edit the audio. Amazing. And when of course now it's lagging.

Mudassir (00:41.314)
Yeah, yeah, I know that. I know. Yeah, yeah.

Yeah, it's pretty quickly. Yeah.

Yeah, it's...

Kevin Van Gundy (00:52.903)
Are we okay?

Mudassir (00:53.017)
Yeah, no, let me actually do that. So I, yeah, we're okay, so just give me a second. So what I'm gonna do is like, I'm gonna pause the upload from your side and from my side as well. So yeah, just pause the upload from your side and from my side, okay. So you should be able to see me now. Yeah, it's much better now, much better now. Okay, cool. So what they were doing is like, you know, yeah, recording and uploading at the same point in time. So what I do is like, okay, stop the.

Kevin Van Gundy (01:14.486)
Much better, much smoother.

Mudassir (01:22.201)
upload right away and then we can upload at the end, like when the recording is finished, so it's a much smoother experience. Otherwise, you're not gonna see me half the time and I have to pretend like I'm listening to you and seeing you. So, it's that kind of stuff. Which I have done. I have done successfully for many, many times. So yeah, okay.

Kevin Van Gundy (01:31.696)
Yeah. Okay. Yes.

Kevin Van Gundy (01:38.398)
Oh man, that's tough.

Mudassir (01:41.305)
Let's do it. Please do a clap for me.

Mudassir (01:47.161)
Awesome. Hey Kevin, welcome to the show. How are you doing, sir?

Kevin Van Gundy (01:52.743)
I'm doing excellent. Having a good day.

Mudassir (01:55.769)
Amazing. My initial thought was the opening should be, oh my god, we have KVG in the house today. So welcome to the show. That's how I prepared or kind of envisioned that. But I couldn't pull it off. Not yo enough, not gen Z enough to do that. So yeah.

Kevin Van Gundy (02:05.417)
Oh no!

Kevin Van Gundy (02:16.27)
Uh, it's, it's okay. Yeah. Prod circle reloaded. We'll, we'll, we'll have the Gen Z host and we'll, we'll get more of the, uh, the, the tick-tock generation stuff going.

Mudassir (02:21.677)
Yeah.

Mudassir (02:26.489)
Yeah, yeah. Again, thank you for the time. So every single time, anybody that I have on the podcast, I try to understand where they come from, what is their story, and how did you end up doing whatever you're doing today. But I want to start a little bit differently, giving the context to the audiences. You've been on this sort of a unicorn ride, like one after the other, after the other, after the other. And I hope what you're doing with HyperMode is going to be another big success.

How did you end up in, like, how did you end up like here? Like how?

Kevin Van Gundy (03:02.51)
Uh, it's, so I, I've listened to so many of your podcasts. I, uh, I know that you answered, you asked this question, like, what's the context of your life? And so I was like thinking about like preparing the answer and I took it down a bunch of paths as I, you know, driving the car, thinking about like, you, how do you answer the question? I, I think I found that when, when being very honest about my career path, it is.

really unfair to underweight how much luck is involved where I know so many really successful wonderful entrepreneurs who just sometimes the ball just breaks in the wrong direction for them. And I'm very happy to share my story, but the theme will be, oh, sometimes we've had really good things happen for no reason. So I grew up in central California in Fresno.

My father's family, they're a bunch of farmers like raisins and almonds. We have been farming in the Central Valley for eons. And then my mom's side, she's an immigrant from the Philippines and grew up expecting to go be a farmer. Went to school in Davis where I'm going to go learn how to be the biggest and best farmer I can be. And again, got a little lucky that the agriculture department is also housed in the economics department.

and fell in love with business and finance. And one of the things I ended up studying was economics in school. And all the smart kids in econ were going out and working banking and private equity. And so decided to, oh, I'll go do that. I don't know what private equity is, but it sounds better than not, you know, going back and farming. And ended up getting a job in San Francisco at a really, really small private equity fund. And this is where the luck starts to play in.

So my mother grew up in the Philippines and one of her schoolmates's sisters lives in San Francisco. We don't know each other, we're not very close at the time and I can't afford an apartment so I'm commuting from Sacramento to San Francisco every morning to go to this private equity job. And my mom calls up this friend says, hey, would you mind just housing myself a little bit while he saves up some money to make first month's last month's rent? And it turns out this one room's Carol Sebastian.

Kevin Van Gundy (05:22.402)
had been the EA or early operator to like all these incredible companies where, you know, on a daily basis, like texting Martin Mikos from, from my SQL of, oh, hey, you know, like, what do you, what do you want to do for dinner or whatever? And as I'm working in finance, I'm realizing that I don't, my heart's not in it. It's, I'm doing hard money lending in real estate and it's just such a tough, brutal business. And there's not necessarily a lot of creativity. It's really just.

How do you just return capital, return capital, return capital? And Carol pulls me aside one day and says, Hey, you seem miserable. Why don't you try startups? You know, you seem, you seem charismatic. You seem like you like to build stuff. And I as arrogant as a 22 year old can be. I'm like, I'm sorry, Carol finances, the center of the universe. Uh, this is these fly by neck tech startups. Like, I don't know. I don't, I don't know if there's, there's a future here. And she literally drags me kicking and screaming.

to dinners with a bunch of her founder friends. And I got to, it was very fun. I got to talk at that LPN event that I told you about earlier before we were recording with Nikita. I like one of my first interviews in Silicon Valley was at his company, you know, this is what, 2012 or something like that. And so it's been fun watching all these circles come back together. One of the companies she like drug me to introduce me to was Neo4j. So the-

Founder of Neo4j Swedish, Martin Mikos is Swedish. And so it was kind of this tight network. And I'm certain she begged him behind the scenes to please get this kid off my couch. Like, just give him a job, give him anything. And Neo4j was very, very early at the time. And they said, hey, we don't need finance people, but you seem kind of business. You seem somewhat charming. Why don't you try sales? I'm like, I don't know what that is, but yes. And so they hired me as an account executive.

And that was kind of the first domino that tipped over where I just, I fell in love with startups. And then I also fell in love with open source dev tools. And that kind of became my, my niche of, I know how to do this thing really, really well. And then went from Neo obviously really, really well, you know, scaled and scaled and scaled and ended up doing all these big multimillion dollar deals. And then from there got to go and try and replicate that success at trade.io and again, bless the, the tray team.

Kevin Van Gundy (07:46.586)
They offer, Hey, like help us build the go-to-market team. And this is pre CROs, but Dom, the, one of the co-founders there kind of treated me like it's year and was very, very kind and said, we'll build out the customer successful bill at the enterprise sales team, build out the ops team. And that gave me kind of my first taste of like, okay, doing more and more and more, and then from there, you know, Domino and in for sale and all that other stuff. Um, but it, along the way, it's been consistent.

mentorship and coaching and help from whether it was Carol at first or Lars who ended up was the CEO of Neo. Those have kind of been like the formative like tipping points for me. I don't know. Happy to dig more into any of those chunks.

Mudassir (08:33.477)
Amazing. Yeah, what a journey. From where to where. So that's very interesting. So I want to dig into all four of these, because these are gigantic companies. And you joined Neo4j very early. Trey was pretty early. You built their GTM. You built their enterprise sales team. When you joined Versel, that was pretty small, I think 20, 25 people. And then when you left, there were like 450 people. So one or two.

takeaways from each one of those? If you can share, like what would those be? So let's dig deeper into those, yeah. Because the reason why I ask like each is because, because I can imagine Neo4j was like, okay, so it's the same sort of a business, because the vertical kind of stays the same, but if you look holistically, every single company, every single startup, they have different challenges, different market, different problems, right? So one or two...

Kevin Van Gundy (09:05.706)
Ooh. Yeah, yeah. One or two from each.

Mudassir (09:33.361)
key takeaways from each of these companies leading up to hypermode.

Kevin Van Gundy (09:38.83)
Sure. So I'll try to go in order. And I think the other interesting overlay is, so, you know, very similar company, at least like in terms of like this model verticals, but different phases of the market and market cycles, but also different phases of me, where at Neo4j I'm a very junior salesperson when I first start. And then each one got incrementally more responsibility. So.

Mudassir (09:57.414)
Yeah, exactly.

Kevin Van Gundy (10:07.118)
The, I think the two takeaways, I think that were most interesting for me at Neo4j was one, I learned a lot about what good leadership looks like and what good leadership looks like when well-meaning, but maybe overenthusiastic employees screw up. Uh, early in my tenure at Neo, I was so eager to just do anything to help the business. And I was trying to generate more sales. I'm outbounding.

And Crunchbase at the time had this thing called their business graph. And I, I saw that was, Oh, that should Neo4j is a graph database. It should run on Neo4j. I send this really snarky email to the CTO or chief product officer and say, Oh, this, this thing's okay, but if it ran on Neo4j be a hundred times better and blah, blah. And you know, within 30 seconds, I get a reply from an actual name, his name, but it's, it's easy to figure out he's not a good friend.

reply cc-ing my boss, my boss's boss, and a board member saying is this kid for real question mark. And I've only been at Neo4j for like a couple of months. And I realized that Crunchbase is our marquee customer. It's like on our homepage. That's like Neo4j and Crunchbase succeed building this thing. And I had not read the most recent release and I'm just trying so hard. And this guy named Charlie Fisher was my VP of sales at the time.

you know, sees the email walks up and says, Hey, Kev, let's go for a walk. And I'm just like, I'll pack my shit up. No worries. And I don't look, I'm ready to go. And the Charlie to me was one of the best leaders in terms of like building that confidence to try and solve our problems where he pulls me in senses. So, you know, you really screwed up. I go, yup. You know, I'm just like ready to be fired. He's like, probably not going to do that again. I'm like, maybe. And he goes, well, I really love the aggression, but next time.

you know, spend a little, you know, just an extra beat, go through our website, make sure you're not bullying our, you know, our marquee customers. And like, that was the end of it. And I think looking back now, having been a VP of sales and looking back at rep behaviors and the things that I want to encourage so much of even, you know, engineering and product, so much of startups is about just trying really, really hard and inevitably you're going to blow it and you're going to screw up.

Kevin Van Gundy (12:30.854)
And diagnosing, is this a one-time issue? Is this going to be a repeating issue? Or is this kind of just a, uh, a thing that we need to build controls and, you know, the, the business maturity wasn't there. And so we, we just stubbed our toes. And the thing that I take away from Charlie was he so quickly diagnosed the issue, knew it wasn't a chronic problem and wanted to make sure that Ida was not discouraged from outbounding, from trying, from trying to go out and do.

the hard part of generating pipeline for the business. And just did in such a calm and cool way that to this day, I tell that story to every SDR cohort I bring in, every sales team I bring in of like, you are going to screw up and my job as your boss is gonna be to protect you and create an environment where you can take really big swings, knowing that you're gonna whiff and that's okay. And so that's one of the big ones about like, that I think was so formative of my leadership style for the rest of my career.

And the other one, and I, I know it's an interesting one. It was like, I still have a lot of really strong opinions about how do you think about open source and distribution engines for your business where Neo4j was pre-cloud, even like pre-subscription revenue. And one of the things that I think we didn't get right in the early days was we didn't get to cloud fast enough.

And we, in terms of our open source strategy, we're not able to create a product. Like so MongoDB was our primary competitor at the time. MongoDB is very, very permissive licensing strategy for a full featured open source product. And I think Mongo got that pop of adoption that we didn't get to experience at first because they very thoughtfully said, okay, what's the most important thing for winning this new NoSQL market? It was distribution, not monetization.

And so those two, I can like one, one business, one, one leadership, uh, was out of the Neo4j side on the tray piece. Um, I'll, I'll be somewhat tactical where, where I think a lot of things that traded really well was, was tactical. Um, Trey did a great job of selling ahead of product. Uh, and again, like they've been very successful now, so I'm happy to share it. In the very earliest days, we used to write down every potential cloud connector tool.

Kevin Van Gundy (14:54.774)
that could exist and we would have a landing page for connect product, deck to product Y. And we was a company that's did cloud to cloud integrations. And they taught me so much about, excuse me. So much of early stage startups is selling well ahead of your roadmap and really, really thoughtfully in that sales cycle, as soon as you know it's real, okay, let's, let's adjust the roadmap to try and close that partner or close that customer.

Sorry, how long do you want these to be? Because I can go off on 10 minute stories on each and every one.

Mudassir (15:27.917)
No, no, no. Yeah, yeah, just go ahead. Like, no limit on any of those. Because I think, yeah, just to give you some anecdote, I'm just going to come back to a lot of these things. Like, the distribution, I still think that's the key. Like, your product doesn't matter. Distribution is like everything. I'm going to come back to the leadership. I'm going to come back to trade.io. And part of the job as a founder is to do a lot of sales.

Kevin Van Gundy (15:34.062)
Okay, okay.

Kevin Van Gundy (15:43.851)
Oh, it's 100%.

Kevin Van Gundy (15:49.987)
Mm.

Kevin Van Gundy (15:56.295)
Oh, yeah, no kidding.

Mudassir (15:56.501)
That's the reality anyway. So you just need to have that. So yeah, please just go into AsmrDev. I just want to be respectful of your time, but I'm free for next 10 years, 10 hours, or whatever. So please go ahead.

Kevin Van Gundy (16:04.798)
Oh, sure. Oh, cool, cool. Okay, nice. Oh, nice. Okay, okay. And one of the things that I thought was really, really clever about what Trey ended up doing is they were both, were really, really good at selling well out of the roadmap, but two, they were very authentic with their customers where kind of the opening sales pitch was always, hey, we're an early stage company, we're like a million in error, if that.

Actually, I remember very specifically when we finally crossed a million in an hour, but we were very authentic with customers or honest with the customers about we're early, but just know that you take a bet on us and we're going to do everything in the universe we can to succeed, to help you succeed. We're going to do everything we can to like make good on these promises. Rather than I think one of the things that I think founders mess up often is they try too early to pretend like they're a big company and, you know, they wear the suit and they say, oh, yes.

You know, our 500 person team is doing all of this stuff and it's so transparent. Folks can see right through it. And really what they wanna buy from a startup is innovation is a new perspective, is access to a team of engineers. They probably couldn't hire themselves and Trey leaned into that so smartly. Domino's was super interesting in terms of just what is the best way to hire the best people in the world where...

The Domino founding team was all out of Bridgewater and Associates. So it's super duper hedge fund. And I've never worked at a company with higher talent density that is in the same we were talking about earlier, before we started recording that YC has, you know, 10% of unicorns went through YC. If you were to look at and trace the careers of folks coming out of Domino data lab, the number of CROs, you know, VPs of engineering, chief product officers that flew through that cohort at now.

the best companies in the world. They just had such an incredible nose for talent. And the thing that I think they did really, really well is they were so structured in measuring, like their hiring process was so thoughtful and structured and design, each piece was designed and each person in that hiring loop had a designed role of you're testing for this and here are your methods for testing it that did such a good job of.

Kevin Van Gundy (18:24.882)
identifying just the smartest, most interesting people. And then Vercell, I mean, there's, I think that was like the most formative where a million takeaways out of that one. And we're gonna talk a lot about scaling of how do you balance professional leaders versus battlefield promotions? How do you think about pricing by phase? How do you think about packaging by phase? How do you build a strong leadership team? How do you balance out?

the best parts of your current culture and say, okay, we know that this is who we are today and this is appropriate for the phase. But when we hit that next phase of scale, how do we start to build a leadership team that's gonna support that style, the new style of leadership that we're gonna need to have where right when you're 20 people, you can just dump all of your thoughts into Slack and say, hey, tagging so-and-so, please get this done. When you're a CXO of a 500 person company, if you tag someone publicly in Slack,

that's terrifying to them. They don't know you, they're not your, you know, your buddy. Um, and figuring out how to cross those different inflection points without screwing up the men to the business was, was another big, big set of learnings. Uh, but yeah, it's been so much fun getting to observe each and every one of these companies go through their growing pains. And, uh, we talked about this before we started recording, uh, companies are so fundamentally broken just at their core. And the fun part of startups is

Mudassir (19:52.539)
Mm-hmm.

Kevin Van Gundy (19:53.122)
figuring out not only like how do we unbreak it, but also what do we unbreak first? You know, and do we need to fix our HR systems? Probably not when we're 10 people, but wouldn't it be great if we figured out how to go to market and all those other pieces. But yeah, anyway.

Mudassir (19:57.692)
Mm-hmm.

Mudassir (20:08.217)
I think, yeah, first of all, thank you for sharing that. I think startup, there's this two things that comes to my mind, like every single time anybody says startup. So one is a phrase that I don't know where I learned from, which is called order in chaos. Like it's always gonna be chaos. You just need to find somewhat of an order. So that is one. And two is, two is prioritization. I think one of the jobs, probably the only job as a founder today, and,

Kevin Van Gundy (20:21.631)
Hmm

Mudassir (20:35.221)
when you become a CEO, the hot chart CEO, the leadership team, it all comes down to prioritization. How do you prioritize? Exactly. Figuring out the culture. When you have five people and you're thinking about culture, that's probably way too early. But when you have 50 people and you're still not thinking, that's already too late. So I think it all comes down to prioritization. All right, cool. So I want this particular episode to be a master class around SAS.

pricing, GTM, scaling revenues and teams, which is kind of a big, big focus that I have for this episode today as well. But I also want to touch later down like how anybody can start a B2B SaaS company today. Not from like zero to one, but like from zero to 10. Like where you find good ideas, how do you edit good ideas, how do you, like go from step one when you have literally nothing, you're just like one person.

to step 10 when you probably have like a millionaire or something like that. So that's gonna come down later in the series. But I wanna start us with the pricing.

Kevin Van Gundy (21:40.846)
Sure.

Mudassir (21:41.537)
So I've been going through all the amazing posts and stuff like that, amazing takeaways that you have around pricing. And there's a lot of different models that are available when it comes to pricing and all that. So what's been a kind of a game changer in your approach when it comes to SaaS pricing that might surprise people who are just still trying to figure it out? One thing that you figured out, OK, because you've done that in many companies,

And within those companies, these smaller initiatives that you launch from zero to one, and then it's a part on its own. So how do you figure out the pricing? Like what exactly is the thought process that goes behind, okay, so I'm gonna charge 20 bucks a month, 30 bucks a month, 100 bucks a month, like why 30 to 100? Like what's the jump looks like to you? And in some cases, okay, have an enterprise, don't show the pricing at all, it's gonna be a couple thousand a month. Like so all the things about pricing that comes to you,

Kevin Van Gundy (22:18.091)
Mm.

Kevin Van Gundy (22:36.691)
Uh, sure.

Mudassir (22:37.629)
It's a big-ass question that I'm asking you, but I want you to answer it in depth as you can.

Kevin Van Gundy (22:43.274)
Oh, sure. I'll start with a surprising thing that I only feel like later in my careers, I've gotten more confident in going through these motions that fundamentally, you accepting that you are going to screw pricing up, and that you're going to have to change it 350 times that comfort with you are going to iterate in your pricing the same way you iterate in your product.

that to me was the most freeing piece where, you know, I remember we were pricing out Neo4j in the early days where we were starting to move from perpetual licenses to subscription licenses and CFOs were struggling with how do I think about operational cost versus a capital expense. And I was again, I was not running the project, Philip, the, the

the CPO at the time was, was running the project and we were so not paralyzed, but we were so worried about getting the business model right for the next 10 years, 15 years, and we're trying to really think through, okay, when we hit this scale, how's that going to, and really thinking of all these permutations. And I, again, to, to the credit of, of Phillips thinking, we, we ended up nailing it was great, but I tried taking that model to Trey and taking that model to, to Vercell.

And because of how fluid these businesses end up being, three months later, you're probably gonna need to readjust pricing, six months later, you're gonna probably have to readjust pricing. And if you know that that's coming and you stop to optimize for, what is your statement early about prioritization? What is my priority right now? Is it acquiring more customers? Is it getting to profitability? Is it getting gross margins right side up? What do I wanna achieve through this pricing shift? Who is my?

Who am I prioritizing for? Is it the individual buyer? Is it the team level buyer? Is it the enterprise wide buyer? And being thoughtful about exactly what you wanna get done in the short term with your pricing with this product launch, that starts to make it much, much easier and a much more solvable problem to construct a price and a packaging strategy that is at least going to not get in the way of your go-to-market motion. Within that,

Kevin Van Gundy (25:06.37)
there start to become some truisms where again, you can do the math behind them to prove it to yourself. But there are things like if you wanna have a B2B sales motion that is run by salespeople where your product needs to be guided through a buying process by a human, your price point probably needs to be north of 36K a year. And typically it's right around 60K. And so,

knowing without their comps in your market or there is a reason why someone would be willing to pay 60k a year for your product. If you say, oh gosh, you know, this is a $30 a seat thing and there's 10 seats per company, I need to make sure my pricing and packaging is self-serve oriented versus being salesperson led because that's just not something my market or my business can support. And so knowing that, can I do enterprise sales? Yes or no.

Can I charge 60 ish K a year? The other one tends to be, are there break points in your product where you can end up really, really upside down in terms of gross margin? And for folks that aren't familiar with what gross margin is, gross margin is essentially a measure of what are the costs of goods sold less the amount of charging for my product. And what goes into the cost of goods sold is if you're a SaaS company, your cloud infrastructure,

your customer support team and your SRE team or customer success team. Um, SRE meaning who keeps the website online or the product online. The sum of that total, you know, is it 50% 70% more or it's less than what you're actually charging the customer. And for context, a public SaaS company that is scaled is typically in the, at the bare minimum, low sixties.

ideal is going to be in the, in the, the seventies. And one of the things that you have to do is you say, okay, I want to have a product led growth motion, most product led growth motion, but what are the, the ways in which this, this could get away from me and I could end up really upside down in terms of my gross margins, making sure to protect against those. And typical with that ends up means why you see so much usage based pricing is do my costs scale along with.

Kevin Van Gundy (27:32.17)
the usage of my product or the what I'm charging for to make sure that your pricing model doesn't end up letting someone who, hey, it's $20 a month, all you can eat. And I did this at Versel very briefly and a couple of super users might say, oh, this is amazing. I'm gonna mine crypto. I'm going to, you know, I'm gonna share my password with all my friends. And, you know, I ended up spending $600 a month.

in AWS bills to support this $20 a month customer. And just making sure you've built those controls into your pricing. And then again, we can keep pulling this out where you can talk about packaging by tier, you can talk about how do you start to decide between whether or not you have a single product company or a multi-product company. And what I mean by that is not the Atlassian model, if we have several different skews, or like product lines, but in the like literal, are you AWS where

Mudassir (28:12.454)
Yeah.

Kevin Van Gundy (28:30.402)
the EC2 instance that I buy as a retail customer versus what Snowflake buys as a super enterprise customer, that's the same EC2 instance and they're just getting discounts on their unit prices. Or do you have a differentiated product where you have a pro edition that has some features and an enterprise edition that's very different features? Because within that, you'll start to think about, do I need the curve of pricing?

Mudassir (28:40.337)
Hmm.

Kevin Van Gundy (28:59.906)
to be smooth, which is that AWS style pricing where it's the same product just with different buying motions? Or can I actually have a step function in that pricing where self-serve is $100 a month, but then enterprise is $10,000 a month, but they're different features for different buyers. And so that's okay. And so you can start to like, again, walk through those problem sets. And then eventually what's nice is the...

Mudassir (29:19.493)
Yeah.

Kevin Van Gundy (29:29.262)
you have all these like different tensions on your pricing motion or your packaging motion. And the really cool thing is when you start to set those constraints around your pricing model, it starts to be really, really clear exactly what you need to land on, which is quite nice. And then also the other thing I tell a lot of founders I work with, when in doubt, just kind of copy your competitor and say, hey, you know, company XYZ is charging 60 bucks a month.

Let's start about there. And as we learn more about our market, learn more about our product, learn more about infrastructure, we can, we can adjust from there. And again, that, that first point, you're going to iterate a bunch and that's okay and don't let pricing be a, you know, a paralyzing set of decisions. Um, just make sure it's not hurting the business and go forward from there.

Mudassir (30:22.253)
Okay, so a bunch of questions on that. Thank you for just touching. Yeah, no problem at all. I'm a product guy at heart, so I just want to have so many different opinions or in different areas. And a lot of the time, when you're working in, so suppose one sector, so suppose you're working in PropTech. So you would only think about pricing when it comes to PropTech. And all of a sudden you just meet somebody who has worked in a whole different vertical.

Kevin Van Gundy (30:26.1)
Yes sir, I have a 10 minute rant on pricing.

Mudassir (30:50.429)
And then you'll start thinking about, OK, so same thing, same product pricing, but in a vertical. So that could also work. So yeah, there's a whole bunch of things that I would want to ask you on that. So do you think every B2B product should also have an enterprise package plan?

Kevin Van Gundy (31:09.248)
Oh, this is a great question. I...

Kevin Van Gundy (31:16.17)
Yes and no, I'll provide more context and color to that. I think depending on the type of business you wanna run, your go-to-market motion and your packaging and pricing motion need to reflect that. If you want to get to a billion dollar run rate scale business, more often than not in the B2B universe, you're going to need to learn how to sell to large companies where...

both in terms of the number of units you can sell into them just because of scale. I sell a product that's seat-based. If I'm only selling to 10 person companies, the max I can sell is 10 seats at a time. And just the sheer volume of companies you need to sell to becomes unwieldy or unmanageable. Versus if I sell one deal to JP Morgan, they might buy 10,000 seats and there's still another 40,000 seats behind it.

Mudassir (32:14.809)
Yeah.

Kevin Van Gundy (32:15.282)
And so as you start to look at what is the scale of business I'm hoping to get to at some point, it's a very likely or need to need, need to make an enterprise motion work that is more often than not sales led there outliers and exceptions, but generally speaking that ends up being required. However, if you want to do primarily self-serve business and small, medium and mid market.

you can often get away with it for a really long time where you are doing much more of a business to consumer style motion that doesn't necessarily require salespeople and enterprise product. And what I mean by enterprise for clarity is something that's like sold by a salesperson. I mean, you can call packages different things, Shopify enterprise, Shopify, plus Shopify gold premium, like these could all be different names of a product.

Mudassir (33:03.865)
Yeah.

Kevin Van Gundy (33:12.566)
Generally speaking, I think as you hit scale and are trying to drive average contract values up, it tends to help to have a business person and it, or a salesperson, and it tends to help to have a package that is designed around that type of buyer.

Mudassir (33:29.699)
Okay, that totally makes sense. Okay, so the next couple of questions, so it's a two-part question. So one is...

And I get to meet a lot of founders, like early stage founders, first time founders, probably second time founders, but they're trying to do something, something new. And to your point, they kind of fixate on a few things. So they kind of fixate on one pricing. Like it's just like pricing becomes a pain in the ass. Like immediately they haven't built a product, they haven't done anything. It's just like, okay, so we need to sell this thing for like, I don't know, $5 a seat a month or something like that. So how can we build a million dollar in ARR, like at the end of the year or something like that. It's all sort of these like.

So we're just probably gonna need, I don't know, 200KC to something like that. So you see that, like they have this weird sort of a math and that kind of drives the pricing. So one is, do you think a perfect pricing model exists? So, you know, and the follow-up on that is, do you also think that founders kind of over-complicate the pricing and just don't figure it out, like, okay, exactly to your point, like if you don't know, when in doubt, just copy and then figure it out later on. But one...

thing that also play, I think an important role is when you are a very small early stage company, obviously, you know, E2C, you're going to buy from AWS is going to be much more expensive compared to Snowflake or something like that. So they can probably sell a seat for like $2 a month and you cannot afford to sell a seat for $2 a month, right? So pricing kind of plays an important role. So what's your thought on both of these questions? So one is obviously, is there a perfect pricing model exists? Because I want people to know that like there isn't.

But anyway, and the second one is, do you actually think that founders kind of over complicate this entire pricing thing?

Kevin Van Gundy (35:14.642)
Yeah, so you want to on the record, no perfect pricing exists, period, underline, underline. I do think as you kind of imagine pricing along this optimization curve, there may be segments that you've really matched the demand to your price really elegantly. And I think that's what I would recommend founders think for is you can't build perfect pricing that suits all customers, all buyer types.

in all situations. But if you are certain that, hey, my ideal customer is a mid-size startup based in North America that has at least 10 Next.js developers or React developers, you can build perfect pricing for that small core, that sub-segment, but you are going to really sub-optimize or screw up what that pricing might look like for selling to Cisco or...

selling to a mom and pop pizzeria. And I think it feeds really nicely into your second question about complexity. Where you add so much friction to your buying cycle is by adding all this complexity of trying to optimize for all corner cases and permutations of buying motions. And more often than not, my urgent recommendation to founders is

in the earliest days and phases being abundantly clear through your pricing of what you're selling and how they should think about valuing it is more important than leaving a couple of dollars on the table in either direction because as an early stage company you've not necessarily earned the right to give the CFO a headache and as an early stage company they're looking for a reason to say

Kevin Van Gundy (37:12.85)
Um, you know, developer happiness, I don't have a measure of developer happiness. I don't know how to forecast how happy my team is going to be. I'm going to go buy something from AWS because AWS charges me for your clocks on a CPU and I understand how to measure and forecast those. And over time, as you get more sophisticated and your product gets more complex, it's okay to incrementally introduce more complex to your pricing, but the headline should always be very, very simple of it's a seat, it's consumption.

It's a unit and it should be intuitive to the buyer such that they are able to immediately start to mentally forecast what is this thing going to cost me over time? And that keeps you in the sales cycle rather than them saying, ah, it's just too hard to figure this out. We're just gonna go with an alternative. For example, we did this at Tray in the early days where we use this notion of a task.

where under the covers we were using AWS lambdas and each time we triggered a lambda, we counted a task and said, oh, you've invoked a lambda and so that's a task. And the thing that was really difficult in the early days, again, we were 30 people, you know, less than, you know, 2 million in revenue. And we are going out to these business buyers and we're like, oh, we're gonna give you a hundred thousand tasks and we would spend months in the sales cycle trying to explain to them what a task was.

And if a hundred thousand was a lot or a little, and it was never about the value, what is the problem we're solving, it was all about helping explain our pricing model. And I've, you know, eventually we fixed it, but it was this really, really informative moment of, oh gosh, it has to be intuitive.

Mudassir (38:57.333)
Like open AI is like, hey, credits. What the heck that credit means? It's like a letter, it's like a word. Oh, credit could be anything, could be an image. Okay, so an image could be one credit, and a line of text could be 10 credits. So yeah, it's exactly the same thing. You never understand. And then I think the good thing is they kinda add this thing. Okay, so 80,000 credit kinda means like 100K words or something like that. Okay, so some perspective. Usually there's literally nothing, right?

Kevin Van Gundy (38:59.982)
Yeah. Oh my goodness.

Kevin Van Gundy (39:22.494)
Mm-hmm.

Yeah. Oh yeah. It makes it so tough. But again, I think open AI is a great example of, you know, you mentioned earlier that founders are become so anxious about how do we pricing, and the reality look open has incredible product market fit. Their pricing is really tough to reason about. They're still doing pretty good. And so it proves out that you don't have to get it perfectly right. And over time, I'm sure Sam is going to

Mudassir (39:47.033)
Yeah, yeah, absolutely.

Mudassir (39:52.112)
Yeah.

Kevin Van Gundy (39:54.41)
really learn how to fit those lines, and as their underlying economics change, I'm sure pricing will look radically different in five years.

Mudassir (40:02.173)
OK, so that perfectly leads into the second question. When you think about pricing, and the reason why I'm spending so much time around pricing is because that is kind of a huge pain point. And I kind of wish, like, if somebody's listening, build an AI product and just give them the idea, give them a prompt. And then it gives you, OK, so this is your market. You should be doing this, this thing. And start with this pricing. And just test it out and then iterate. Let's just go. OK, move the friction away. So anyway.

Coming back to this thing, so one important thing when it comes to pricing is like what to get and what not to get. So I'll plug your post that is very close to me, which is you just wrote this thing about like Netflix charges you. So you need to figure out a thing that you're going to just get and then you also need to figure out a thing that you're not going to get. For example, Netflix charges you a perma subscription but doesn't give a...

Mudassir (41:00.501)
anything about like doesn't charge you anything about how many movies or how many seasons you're gonna watch that you can watch anything right but it's gated compared to amazon finally that's kind of different like you need to have you need to have a membership and then you also need to have you know on demand and this and that so how do you figure out do you what to get but not to get you know the entire usage slash user sort of a debate so what's your take on that

And the second question is, I want to have your opinion on sales-led and product-led growth. Because being a product person, all the time, anybody even in my sleep would ask me, I would say, oh, go to product-led motion and have the PLG, have the PLG. I would be leaning towards that. But I also recently come across this thing like sales-led growth is, one, not as bad as people portray it, and two is, you get a lot of money.

if you kind of focus on sales growth. So, yeah, that's a different part, right? So two part questions. So one is what to get, what not to get, the user uses seed. And the second part is sales that was part of that.

Kevin Van Gundy (41:59.304)
But they are very expensive. Yeah, yeah.

Kevin Van Gundy (42:12.278)
Yeah. On the what to get, what not to get the, the fundamental concern that I try to answer, at least when I'm, when I'm working on this within my own companies is how do I not get in the way of, you know, these great friends, like my viral loop and functionally what that ends up meaning is what are the things that improve the, the organic expansion, organic adoption of my product within a company and I mean, someday again,

pricing is always complex. There's sometimes you have to gate that thing that creates your virality. A good example of us of doing this was at Vercell. We had this thing called the preview deployment, where every time you wrote a little bit of code, you'd merge your pull request to GitHub, we would automatically generate a preview of that website that you've built. And there were these great little URLs that say,

my company.site.app or eventually when we renamed it for sell, my coming out for sell.app and the product managers or front end engineers would share that all around their company of saying, Hey, here's the latest iteration of our marketing page. What do you think? Hey, here I've worked on this feature and it generated so much awareness of our product within the company that very often we would get inbound sales again, when we were selling to larger companies where, you know, since, oh, hey, three teams over so-and-so sent me this thing, you know,

Mudassir (43:27.907)
Hmm.

Kevin Van Gundy (43:37.674)
I really want to try for sell for my team. And it created this amazing organic expansion within the account. And those were sacred. You could do nothing to gate those because that was how we ended up growing within accounts. And I think sometimes well-meaning spreadsheet people will look at that and say, oh my gosh, if we charge for that unit, those go up so aggressively over time, we're gonna make a lot more money.

But as soon as you, whatever you add friction to or whatever you price on in your pricing model, users will by default optimize away from it. And if you want your URLs to be shared throughout your business, if you charge for them, the user will be like, oh gosh, I don't wanna share that URL because it's gonna charge me $3, $5. I think Figma is another great example of this of you could just pass that Figma URL and everybody could look at it, could edit it. And it was only when you needed specific needs or features, they then say, okay, let's charge for that seat.

Mudassir (44:27.975)
Yeah.

Kevin Van Gundy (44:37.438)
And say we're thoughtfully again, preventing like the virality of their product within businesses. And so that's always a question that I ended up asking folks of what is the. Unit of adoption of your product and can you leave that ungated? And for example, if it's starting new projects, if I, if I, you know, and my primary adoption unit is websites in production.

maybe I don't want to gate the number of you, you know, domains that you could have on a given account or whatever it may be. And that, that always comes down to this trade off of can I ungate that without ruining my business and by ruining, I mean, uh, to the earlier point about my costs run away from me and I'm unable to actually stay in the game long enough to enjoy the value of this viral loop on the

product-led growth versus sales-led growth side, I fundamentally think, oh, sorry, I'm delayed. My mobile device manager was like, I'm gonna restart your computer right now. Please don't. So on the product-led growth versus sales-led growth motion, I think in earnest, the modern buying cycle is actually a unity of the two.

no matter what B2B company you run, I don't think you can very frequently get away with not having some sort of product-led growth motion. And to be very specific about what product-led growth is to me, it really means either self-serve or free trial where users can make a decision about buying your product without human interaction. The difficulty of product-led growth is it assumes that your product

Mudassir (46:19.795)
Hmm.

Kevin Van Gundy (46:31.438)
is mature enough and sophisticated enough that a user with no prompting, no, no communication, no docs can go through, understand what you do and then reap value out of your product. And very often the early days I'm pushing back against founders like, Oh, we're going to go PLG. It's all going to be self-serve. We're going to scale to the moon tomorrow. And then you'll ask, Hey, like if you, you know, let's go grab five of your target customers.

Mudassir (46:33.797)
Mm-hmm.

Mudassir (46:38.598)
Yeah.

Kevin Van Gundy (46:58.506)
Let's just watch them try and use your product. Don't say a word, you can't help them. Can they get through it and be really successful? And in the early days, again, you've done this as well. Your product stinks. Like version 0.1 is terrible. You know, there's loose wires everywhere. You know, there's sharp edges. And sales at growth or often founder sales in the earliest days is a really great way for you to.

Mudassir (47:02.789)
Yeah.

Mudassir (47:11.09)
I know. Yeah.

Kevin Van Gundy (47:26.862)
paper over the things that aren't mature yet in your product, or maybe your docs aren't very good, your errors aren't very good, your ecosystem's not very strong yet. Having a human there who's just helping, like, oh, if you don't click there, if you hold this button down, like all those things, or you can work through that. And so I kind of the way I imagine the modern B2B SaaS company evolving is it starts founder led sales, even if in the longterm you wanna be

Mudassir (47:44.401)
Yeah.

Kevin Van Gundy (47:56.926)
self-serve product-led growth, then you can start to scale into, let's open up the self-serve product and observe, what is our drop-off rate? What are our atrophies? Can folks actually be successful? And then once you've hit kind of that initial mini-brand, then you start to push up market and say, okay, now, because for example, a Walmart truly can't buy self-serve. They have all sorts of crazy procurement requirements and indemnity requirements that they think it's a self-serve only PLG product.

This, ah, it's probably not for me. You know, I'm gonna go to Microsoft and buy, you know, I'll buy Teams. I won't buy Slack because it has, you know, or whatever it may be.

Mudassir (48:36.537)
Yeah, that's great. Thank you for just going in depth. Okay. So moving toward marketing and sales and scaling, probably because it ties into each other. So the first question that I want to ask you is, which is one of the thing that I was asking you prior to the call as well, what the heck is a scale? The reason why I ask you this question is because

This entire startup ecosystem is kind of built on subjectivity. Most of the things that you would say is like success, subjectivity, scale, subjective, product market fit, subjective. You just can't measure these things, right? It's a good part. It's a part of the game. What exactly is the scale? Going from 100k to a million, that is a decent enough scale. That's like 10x the revenue.

and then going from a million to 10, that's 10x, or probably going from a million to 100 million, like that's 100x. So a lot of times we see people say, we just 10x the revenue, we just 50x the revenue, that's a scale. What the heck is the scale actually is? Like when you say the company is in series B, C, and like that kind of a timeframe, what does that look like? Like what scale means to you, or like in general, like what is scale?

Kevin Van Gundy (50:00.026)
So there's this great YouTube series called Blitz Scaling that was put on by Stanford GSB. And the analogy they use of scale is they talk about from, I'm gonna screw this up, but go with me. I think it's a family, a household, a village, a town, a city, a metropolis, a nation. And

the way they describe it is very much these like horizons of complexity are the different phases of scale where and what makes something scale such a difficult and poorly defined thing is it's not for example going from 0 to 10 million not all the different parts of your business have hit that next phase of complexity where you may get to 10 million in revenue with.

50 people, 20, it's called 20 people for simplicity. You've not hit that next phase of complexity where you need to manage internal comms, where at 20 people, everybody can more or less be involved in everything and know everything. And the relationships you have allow a specific style of communication where it can be very, very direct because we are all tightly knit into this, this small 20 person pod. But the 10 million in revenue,

has hit a phase of a complexity for your sales motion, where you've kind of sold through your initial, friends and family adjacent, because it's now large enough that for you to hit 30 million next year and continue like the triple, double, I'm gonna need twice as many salespeople. And then that means I probably need sales managers. And so that complexity of that organization has now hit that next event horizon. And then...

What I'll also say scale for me is at the flat points of these growth curves, where when you're doing, for example, product-led growth on your first product in your first iteration of it, you will sell through a bunch of the, you've got this great product market fit. And at some point you start to sell through all that addressable market and that growth starts to flatten out. And then that's your next phase of scale where you have to start to think about how do I either.

Kevin Van Gundy (52:23.17)
penetrate deeper into my current market and add more features so that I can charge more from this current cohort, or do I need to go to a new market and there's a new geography, or is that a whole new product line? And then you're hitting those phases of scale. Sales tends to scale in terms of size of the customer you're selling to and then the size of the team. And then I'll argue operations tends to scale as a function of

the number of humans that you are, you're doing a working at that company. And so it's tough because they don't all happen at once. We're like, maybe great, right? Because you don't have to like fight a whole new level of complexity in all three fronts at once.

Mudassir (53:06.893)
Yeah, totally agreed. Okay, so coming back to one of my earlier point, and I think this is gonna go very smoothly to marketing and sales. There's this tweet by somebody, I think back in 2017, that first-time founders optimize, first-time founders optimize for products, second-time founders optimize for distribution, or kind of assess for distribution, which is right to its T, which is totally right. So,

Kevin Van Gundy (53:28.812)
Hmm.

Mudassir (53:36.837)
So a few sort of an open statement slash questions on top of that. I think when anybody starts a business today, they should be figuring out the distribution and they should be getting onto that demand side of the business as early as possible, and rather than building apart and then looking to sell it to somebody. So question number one is, obviously, what's your thought on that?

But that said, question number one is, how to build a good GTM early on? Because GTM is just like, OK, so we're just going to go to market, and how are you going to go to market? So we're going to have partnerships. Kind of partnerships. I don't know. So you see, a lot of people kind of just phase out of that. So one is, how do you build a GTM? And two is, when we say, OK, so you need a co-founder, so you need a co-founder, you're not a

technical person, but you're building a technical product, you probably need a CTO with a very technical person and you can have them as co-founder. Do you actually think that people should think more about having a co-founder who's coming from that marketing GTM kind of a distribution background, so it kind of helps you at the beginning, beginning takes you off like right, right when you're building something or you know, just kind of oversubscribe before you're even, you know, launched or something like that. So yeah.

It's kind of like a very open question, but I just want to have your opinion on all of them.

Kevin Van Gundy (55:04.226)
Yeah.

It's a really interesting thought. I...

I'm going to give you the worst, most executive answer. Well, it really depends. I think, one, I think you're entirely right. The distribution ends up becoming the most critical thing, especially in what I'll call this next generation of company, where there's no monopoly on ideas. You know, if you look at the AI market, the foundational market set of competition is incredible.

Mudassir (55:17.477)
Yeah.

Kevin Van Gundy (55:41.27)
And it really becomes this game of obviously your model needs to perform well, but how do you actually get your model in the hands of your buyers quickly or at scale? And the, I think the trick of it always ends up being, uh, being very, very thoughtful of how am I going to access my buyers over time? And it can't be, you know, the field of dreams. If we build it, they'll come. It needs to be, okay, is there either one we're solving a

Mudassir (55:41.322)
Yeah.

Kevin Van Gundy (56:10.454)
really meaningful prompt for a really small set of people who are all gonna go tell all their friends because like, I hate spreadsheets so much and please like you have to try this thing. Or are you doing something like open source which becomes this really incredible distribution engine where folks are all participating in this thing. You are, it's a permutation of freemium where everyone can try the thing, make sure it works for them. And then if you hit the right conditions, they're willing to consume it. I...

I'm uncertain if you need a business co-founder or a marketing co-founder. I think it really depends on the founder or like the, whoever the CEO is like the, because I think one of the things that is like a crucible that founders do need to go through is being radically uncomfortable. And as a CEO, so much of your job is external facing and it's actually, I think a really healthy.

Mudassir (57:05.145)
Yeah.

Kevin Van Gundy (57:08.558)
first taste and test of what your job as a CEO is going to be is doing the first handful of founder led sales because so much of what you do as a leader ends up being communicating, convincing, you know, cajoling, coaching, all those things. And early sales is going to function a lot like that. And so even if you eventually grow out of founder led sales, you're still going to need to like.

rally the team internally. Hey, we really need to go do this thing. It's uncomfortable, but let's go push through it. And if you explicitly hire a salesperson upfront to get you out of that portion, I think over time you're going to run into that issue and you will not have that opportunity to build that muscle early. And so I think I would argue

maybe it does, I don't think you have any, it's obvious, very, very helpful having, again, if your best friend happens to be a CRO and you're a technical product builder, like please go build a company. But I would still invest in a company, this is what I'd say, that didn't have a business co-founder, provided that the founding team was curious about GoToMarket and wanted to learn and wanted to try that piece.

Mudassir (58:09.349)
Yeah.

Mudassir (58:17.327)
Yeah.

Mudassir (58:32.861)
Okay, so I'm gonna come down to this entire GTM sort of a question later down when we actually lay down the entire plan, like how to actually start a B2B SaaS company. But, so I just want to focus a little bit on the leadership side because one of the challenges that I've seen, and this is, this thing keeps coming back to my mind, like startup is the game of people. Like, if you're good with people, you're gonna be good at startup. Like, that's it, like it's just that easy. Obviously, all things considered.

There's a lot of things that you need to consider, but anyhow. Before we get to this one thing, there's this sort of visceral itch that I need to scratch. And that is, I was talking to you about that report, like out of 800 unicorns, and I was just giving you stats. You'd be surprised to know, so more than 60% of them are B2C, like little B2C, like WhatsApp, and all of these social media, something like that, like whatever.

But I host and I meet so many VCs on the podcast and otherwise. They're all very much focused on V2B SaaS. So why do you think VDC is more challenging? And I can see the smile, so I would love to have your take on that. So why do you think VDC is more challenging beyond just saying, yeah, you just need to have more people. And then the churn rate is going to be higher, and this is going to be higher, and that is going to be higher. So why is it actually challenging?

but also have higher returns.

Kevin Van Gundy (01:00:06.09)
man, I will preface this with I know nothing about B2C. But as a CEO, I have opinions about everything. My general belief is B2B is a very reliable motion where

Mudassir (01:00:11.709)
Okay.

Kevin Van Gundy (01:00:26.978)
Provide again, the known unknowns are much more limited on B2B where it's, I don't call it simple. It is knowable the phases of scale that you're gonna need to go through, the motions you're gonna need to run through, finding a business unit, going through those motions, building demand, and all of those pieces. Where in the same way, media and YouTube fame and all these other things feel a little bit more random.

I think B2C operates under those same market forces where it's not necessarily always the best product wins or you can't force it to a reliable outcome. It feels much more binary where either you hit the vibe and you are the thing or your great product dies in anonymity because you know just the moon was in the wrong phase or you know it the color purple you chose wasn't the right color purple.

And I think for investors, especially when you are being trying to be very, very thoughtful, what is the, the return profile at what time phase and what time horizon am I delivering to my, my limited partners B2B is such a knowable and reliable type of business. They, Oh, these things are true about the business. It's highly likely they're going to get to this next phase and this next phase with B2C. I mean, there's so many horror stories of initial scale, you know, founder says something not smart on Twitter.

Mudassir (01:01:42.643)
Hmm.

Kevin Van Gundy (01:01:56.262)
and then the brand value is evaporated. And because very often you're selling fungible goods, the next company that's making coffee cups or whatever just moves into your segment and you're gone forever. But again, I have no expertise in B2C. So like all I know is B2B seems very reliable, very easy to do. B2C, there's a randomness to it that makes me nervous.

Mudassir (01:02:10.827)
Yeah.

Yeah.

Mudassir (01:02:18.201)
Yeah, absolutely. It's a very fickle sort of a segment when you get into that. It's like, one wrong tweet and you're done. It's just like that. You're just like one tweet away. Okay, so coming back to some of the leadership thing, and thank you for just starting the episode with, the most important that happened to you was with that leadership, with your VP of sales and that small walk and that one.

Kevin Van Gundy (01:02:22.71)
Yeah, exactly.

Kevin Van Gundy (01:02:28.394)
Yeah.

Mudassir (01:02:47.773)
thing. A couple of questions actually on that. When you're like a team of 20 people, so I still consider that's like somewhat of a small team. You have a couple million in AR or whatever, but you're a very small team and you have like around 20, 30 people. When you just go above that, when you cross 50, I think that is when you kind of become a mid-sized company. And when you hit 200-plus people, 300-plus people, that is when you're actually a big company, right?

So culture becomes more and more and more important as you go up, right? Like when you have like 400 people, 500 people, like 600 people, culture becomes more important. The question is, to your point, like you just cannot drop a text message, hey, just get this thing done, there's like 500 people on the Slack. So the question that I wanna ask you is, how do you make sure that employee number 601,

is also, you know, he also has the same kind of value. He also embodies the same kind of, you know, structure and all that, and fits the same culture of the company. Like, how do you make sure the culture stays intact? Or do you actually think that the culture, your culture actually changes, you know, when you scale the company, like when you're a 20 people company, you kind of have a different culture, and then once you're like 50 people company, you kind of have a different culture, and then when you have 500 people, it's a different culture. So you...

Two part questions. One is, does culture change with the period of time? And second question is, do you think, like how do you think you just maintain the culture? Like you just don't want the next 300 employees to be a mess up or a screw up or something. How do you do that?

Kevin Van Gundy (01:04:36.639)
I have a lot of scars of getting this wrong. In terms of the core culture question,

I think culture tends to be a merging of two things. One is, I think in a lot of ways, culture is fundamentally an enunciation or a function of your CEO's personality and who they are. And I think at very, very large scale, if you're a 100,000 person company, maybe less so, but I would say at least in every...

scale of company I've worked at, you know, from a thousand employees and down, the company is still small enough that the communication styles, behaviors of your CEO and by function there, the leadership team end up strongly dictating, are you a really harsh culture? Are you a really soft and family culture? How do you measure expectations? Those sorts of things.

flavor is going to be heavily predicated on your CEO, your founder, no matter how much that company scales. You'll get different iterations of it, but that core element will remain the same. And then I think the second part, and this is where it becomes much more manageable, there's a great quote by Patty McCord, which is, culture is not the stuff you write on the wall, culture is who you hire, you fire, and you promote. And I think

Mudassir (01:06:10.331)
Yep.

Kevin Van Gundy (01:06:12.214)
this is one of the things that I've definitely am still learning and hoping to improve on. But in the earlier parts of my career, I would treat each one of these culture decisions as atomic of, oh, we've got this engineer who's a real jerk to people. It's okay, like the blast radius is small and that's okay. But especially as you're scaling quickly, those issues replicate really, really fast.

And that jerk engineer who you've decided to protect ends up becoming kind of the default behavior mode where folks look at that say, oh, well, you know, Kevin really like so and so because, you know, they're a total jerk, but they keep getting promoted or they keep getting good jobs. And so, you know, oh, like I should be a jerk too. I should come out, you know, guns blazing all the time. And that's the way to make my mark on this company. And

I think that more than, you know, reading radical candor and this other stuff, but the team will be very, very aware of who you fire, who you reward, who you promote. And that ends up being, I think, the thing that ends up shaping culture most dramatically beyond, I think, you know, that the shade of purple you get is going to be founder personality, but then, you know, how that thing gets, gets tattooed across the business.

comes down to that higher fire promote.

Mudassir (01:07:43.501)
Okay, that's a very wise thing that you mentioned. Off the line, off the line, you know, this is not, yeah, off the record, sorry. Quick story, in the last company, we hired a dev, and we were thinking of making him a CTO. Total jerk, like, to a point you can't imagine. And then, one of the, you know, there were, like, we were three co-founders, so two of the, one of them were like, hey, we're not gonna fire him. And we were of the opinion we should let him go, like, immediately.

Kevin Van Gundy (01:07:47.942)
Oh, yes.

Kevin Van Gundy (01:07:53.772)
Yeah.

Mudassir (01:08:13.125)
He didn't. He protected him, promoted him to the team lead side of stuff. And there come a point when the entire team, and then he was like, we're not gonna work. Period. There's nothing you can do about it. We're not gonna work. So they didn't do shit for like a week. They didn't touch it. There's six people team, and everybody was like, nobody was willing to speak up. Nobody was willing to say anything. It's just like, we're protected. You just can't touch us. So totally ring a lot of bells. Yeah, it's horrible.

Kevin Van Gundy (01:08:33.195)
Yeah.

Kevin Van Gundy (01:08:37.75)
Yeah. Oh my gosh. Yeah. I mean, I get at some point if you ever come to San Francisco, we should we should go for a walk and coffee or if you drink it a beer. So many good stories about like, screwing this up. Oh my gosh. Yeah. So many horror stories.

Mudassir (01:08:50.245)
Absolutely. Oh, yeah, absolutely. Yeah. Yeah, the next time I'm in the States, you know, I'm just coming to San Francisco right away, OK? Yeah, whenever I am, OK? Awesome. All right, so rolling back. So how much time do you actually have?

Kevin Van Gundy (01:09:02.014)
Oh, yeah, yeah. Oh, let's go.

Kevin Van Gundy (01:09:10.786)
So I just, part of why I was texting a second ago is I texted my EA, I was like, hey, can we push back my next thing till 10 a.m.? So we've got 30 more minutes. Yeah, but then it's a really hard stop at 10, yeah.

Mudassir (01:09:18.533)
31 minutes, okay. So I just want to get a couple, yeah, no, I totally respect that. I just need to get, like, I'll get to the windup state, okay? Cool. All right, you with me? Cool, okay. Rolling now, all right. Okay, so thank you for just, you know, touching that in this thing. So I really want to get this one thing out, and which is if anybody wants to start a B2B SaaS business in 2024,

Kevin Van Gundy (01:09:30.39)
Yeah, perfect.

Yeah, I'm with you.

Mudassir (01:09:48.805)
Just give us a blueprint. OK, so high level. This, this, this. This is how. OK. Yeah, OK. I really wanted to know idea, what is the next step? OK, pricing. OK, what is the next step? JTM, next step. So I just want to have this sort of framework that we can give to people. So we can share that afterward, everybody.

Kevin Van Gundy (01:09:54.882)
Step one AI, no. Sorry, please continue.

Kevin Van Gundy (01:10:04.366)
Mm-hmm.

Kevin Van Gundy (01:10:15.362)
I have somewhat of a contrarian take on company formation where I don't think the idea is as important as people tend to think it is, where almost never, occasionally it happens, but almost never if you talk to a founder and they're really honest with you, we'll say, oh, I had this idea, we're gonna have this amazing social network where people were gonna connect and all, no.

It's either a little bit of randomness of, yeah, we started this thing and it took off, or we built this larger product and this is the sub-sec that ended up working out. But more often than not, what remains true is from inception through scale and success and all those things, it is they've chosen a person, a company type, a buyer that they wanna serve and solve problems for. And I think that to me is the thing to be

really, really thoughtful about if this is a company you want to take all the way through scale and be the, you know, the leader of for the next decade. If you're just trying to do like small P E flips, like don't worry about this, just go find a monetizable problem. But if you really want to build something, being very, very thoughtful and very, very aware of who that person is that you're serving and wanting to be like, ah, man, if I could just solve problems for, for example, I, I've seen my whole career serving developers.

Mudassir (01:11:16.485)
Hmm

Kevin Van Gundy (01:11:41.17)
I, there's something to just still to this day lights me up about, you know, by like, I write these incantations in this little black box and cool things happen to great experiences are built. And no matter what I think throughout the rest of my career, I'm going to want to serve developers because I just, that just is so neat to me. And so step one of building a B2B company is what is the buyer type I want to serve? Is it finance people? Is it business people? Is it, you know,

developers, so knowing that, and then I think the idea, the initial idea is somewhat a function of that, of, okay, what are the biggest problems to that type of person? Again, that I am really well equipped to solve. Okay, I really love developers. I am really good at building dev tools. I'm, you know, could I build a great vertical SaaS dev product? Probably not. But could I build them toolkits to be really successful? Oh, heck yeah, okay.

So I wanna serve developers, I wanna build them products that make their days slightly less painful, a little bit more fun. And then from there, it starts to fall down the hill of, okay, from that, what is the first product permutation that will alleviate some level of pain to at least get me that first 10 design partners? Of, hey, Mr. and Mrs. Developer, do you struggle with X? I think I could solve that for you. Would you help me?

Mudassir (01:13:00.057)
Yeah.

Kevin Van Gundy (01:13:07.03)
design the solution for that thing. And I think Nick Elpernovert Domino did a master class on this with early phases of Domino, where he had built products for serving data scientists at Bridgewater. And he said, I wanna go serve data scientists, but I don't know what I wanna build them. And literally went through an interview to a hundred data scientists and just, you know, and he was asking, tell me about your day. How's this working? And would ask the same set of questions again and again.

And through that mosaic of ventures, oh, well, there seems to be this workbench problem of not having access to prior art, having to work with IT, and not being able to get the right packages for the machine learning that they're doing. And it was through that figured out that first idea. And then this is what I think the cleverest bit was. He then went back and said, hey, remember three months ago, we talked about this thing. Well, I built a thing that solves that problem. Will you try it?

And then that's how we bootstrapped his first, you know, dozen customers. And then from there, again, somewhere along the way, you've probably raised capital, maybe, maybe not. But as you kind of go through that phase, then you can start to think about, okay, is this operating in a big enough market where, you know, are there enough, you know, for example, taking Domino's an example, are there enough data scientists in the world? And can I reasonably charge them enough money?

Mudassir (01:14:09.093)
Very cool. Yeah.

Kevin Van Gundy (01:14:36.374)
for me to have a business that, you know, throws off a hundred million dollars a year in revenue. And if that's true, then you can go out and raise venture capital and say, okay, hey, I have a proof of concept, you know, that's mostly spaghetti code and sadness and some notes, but I've got an idea that there's a real texture to it. It's validated by, I went and talked to, you know, a bunch of developers or data scientists or salespeople.

Mudassir (01:14:54.417)
Hehehe

Kevin Van Gundy (01:15:03.818)
And then you go out and raise that capital. And the thing that I, as a, as a tangent to B2B SaaS, and I think that I'll, I'll warn founders about is, um, if you're going to raise venture capital, know the type of business that you're going to be expected to build and a slow growing profitable business that, you know, scales out to, you know, 5 million a year, 10 million year, which as an individual is a really cool business. It's amazing.

Um, isn't going to be suited for the type of returns a venture capitalist needs. And so if you accept that venture capital money, know that the implicit promise you're making is I'm going to try and scale this to be a very, very large, very, you know, prolific, um, B2B SaaS company. And, you know, just know that promise you're making by taking that money. And so you go, you raise capital, you've hit your first 10, 12 design partners.

the next phase is actually getting them to start paying. Like that's where the rubber kind of meets the road and our pricing discussion. The thing I'll say is like very often, like your first 10 customers will not be indicative of your next 10 or your next 10. And don't try to over monetize those customers or make sure that their pricing model is sustainable. What I've done at three of the four companies that I've done this,

Mudassir (01:16:09.253)
Yeah.

Kevin Van Gundy (01:16:32.322)
done kind of the first handful of sales, we give those design partners quit for convenience, meaning, hey, at any point you don't like us, you can leave. We make it really, we de-risk it as much for them. But the proof point is, will you pay me money to solve this problem for you? Because it's really easy, ah, I think it's really interesting, it's really neat. But are you, my buyer, willing to go to your manager and say, hey, I need the credit card, or I need to go through procurement, I need to go and suffer?

to get this problem solved and allocate budget to solve that problem. And so the amount of money is not that important, but is how important is this problem that I'm solving to the buyer that they're willing to go through and typically paying scales with revenue in terms of procurement process or cost with the procurement process. And am I solving a problem that means enough to them that they're gonna go willing to go through $100,000 worth of headache to buy my product?

Mudassir (01:17:03.407)
Yeah.

Mudassir (01:17:29.977)
Yep.

Kevin Van Gundy (01:17:32.35)
And again, I'll kind of blitz through the next hand wave rest of the owl. Once you've done call it your first 250K in sales as the founding team, then you can start to have an understanding of here's what the repeatable process looks like. Again, the earliest twinges of what that repeatable process look like. Hey, it turns out we're not selling to data scientists, but we're selling to data engineers, or we're not selling to developers, we're selling to database architects.

you'll start to understand who your actual buying persona is. You'll start to understand what value they see in your product. Cause very often what you think the value is and what the customer thinks value is aren't necessarily the same. Uh, I mean, gosh, we, we found this out in a big way at Vercell where, uh, very, very hot company bought our product. And, you know, cause we were building Next.js and we were building this hosting platform for it and the.

The company said, oh, we don't use Next.js. We don't use React, which is the parent JavaScript library that Next.js is built on top of, and we don't wanna host on you at all. I'm like, cool, what are you buying? You're giving me $60,000 a year. What are you getting from me? And they said, oh, these preview URLs are magical. What used to happen is our developers, they'd build against their own EC2 instance, they'd ship it off to DevOps and then put it in a prod, buy in a feature flag, and then three weeks I'd get feedback from marketing.

Mudassir (01:18:38.681)
Yeah. Mm-hmm.

Kevin Van Gundy (01:19:00.97)
on whether or not they like the shade of red I chose. And with Vercell, I push some code, I get a preview and instantly we can iterate on the thing. And I think they were second or third enterprise customer. And I went back to Gajer and I was like, oh, holy smokes, man. I think we've got a different business here. And one of the taglines of Vercell is develop preview ship. Develop and preview, we didn't know we're important.

And as our customer came, he's like, this is really important. Oh my gosh, this is amazing. And I think the lesson in that is in this, those early phases, be willing to listen to your customer, they may not be right, but be willing to listen to them about, Oh gosh, Hey, like this is a valuable thing that you've built and lean into that motion. So, you know, you've got 250 K in revenue. You're probably going to hire your first salesperson. And the thing that you need to have before you're able to fire, hire your first salesperson.

Mudassir (01:19:32.654)
Yep.

Kevin Van Gundy (01:19:57.55)
is the ability to enunciate kind of what the story of the company is of, Hey, you know, we built this thing to solve this problem and here's where we're going, here's what we believe. Um, and you need to know who that buyer is and you know, kind of what problems you're solving for that buyer. And then you can kind of plug those things into a salesperson and they can iterate on it for you really, really quickly. Um, and then obviously like magic happens, you close a bunch more business that thinks it's work, you hire more people.

Um, but we, we do a whole other podcast, but going from like one to 10, 10 to a hundred, um, but those to me are, I think the first initial phases of, uh, find who you want to serve, essentially get them as design partners, then see if you can actually get them to pay you money. And then from there, as you've done that repeated number of times and you generate understanding of this seems to be a common theme amongst the few people who are willing to buy me money.

Mudassir (01:20:29.668)
Yeah.

Kevin Van Gundy (01:20:54.006)
then you can start to scale the go to market team and hire in a rev ops person, a marketing person, a sales person, just start to actually then say, does this thing, is this thing as repeatable as I thought it was? And as you get more and more conviction about repeatability, you can then start to scale up and scale up and scale up the number of salespeople and business lines and all that other stuff.

Mudassir (01:21:16.257)
Perfect. All right. So we need to wrap this thing up in the next eight or nine minutes. So I just want to have like 10 minutes because I need to tell you how to upload and all of that stuff. Okay. So there's this one last question that we need to get in. Let's just get it as quickly as we can. Okay. Cool. Rolling again. Thank you so much, Kevin, for all the wisdom and every single thing that you talked about.

Kevin Van Gundy (01:21:24.258)
Yeah. Oh, sure.

Mudassir (01:21:42.381)
I just so hate that there's so little time. We definitely need to do another podcast around so many things that I was planning on asking again, a bunch of time. So we do have this one small ritual on the podcast. So what we do is we ask all our guests a question for the next guest without telling who the next guest is gonna be. We've been doing that for like, since the episode one. So the question that the last guest left for you is, what does success look like to you? And how do you measure it?

Kevin Van Gundy (01:22:09.482)
I, it's interesting. As I've gone through the different phases of my life and my career, like success has meant a bunch of different things. Like first line of success for me was, you know, going to the grocery store, not looking at prices, which is kind of, I mean, like, I remember like, it's a luxury. You go through, it's like, oh, we're gonna put this stuff in the cart. And then, you know, success then was.

Mudassir (01:22:31.525)
I know.

Kevin Van Gundy (01:22:36.862)
I want to be a VP. I want to be a C level. I want to be this or that. And, um, you know, it's funny, my, uh, the thing that I've, I've at least like recognized as I get later and later in my career, like no matter, no matter where you go, like you're still you and you're still going to be as fundamentally happy or unhappy as you are, no matter how big the house is, no matter, you know, how fancy of a title you have, and, you know, at least in this chapter of my life, like successes.

really come down to I think a lot of the things we talked about earlier, but it's been in building these like human connections and human relationships and having this opportunity, especially in like the business world, to serve others, especially serve my peers. And like that to me, like nothing lights me up more than having a friend who's, hey, I'm starting this new thing. And the fact that I, over my career, have like earned enough, you know, either knowledge or connections or whatever.

Oh, here, let me share that with, let me help you with that. That to me makes me feel more successful than, you know, anything else that I've accrued in this life. So yeah, I think that's how I measure it is like, there's like a tuning forth that goes off like, can I help someone, especially kind of in the ecosystem that I have a lot of leverage in to do really cool stuff.

Mudassir (01:23:57.177)
Amazing. Oh my god. Thank you so much for that. The question for the next guest, we can skip that. You can send an email, send out a message or something. Let's just say bye so I can stop the recording and we can talk about how to upload it and stuff. OK? All right. Cool.

Kevin Van Gundy (01:24:05.547)
Oh sure, yeah yeah.

Kevin Van Gundy (01:24:11.998)
Oh, sure. Yeah. Cool.

Mudassir (01:24:17.145)
Alright, rolling again. Okay, Kevin, thank you so much for the time. Gosh, I love talking to you. I just only wish that, you know, of all the things that we talked off the record, we could have talked, you know, we could have spent the same time talking about on the record. So again, thank you so much, sir. Thank you so much for the time. It means the world to me. So I appreciate it.

Kevin Van Gundy (01:24:27.982)
No! Hahaha! Yeah, yeah.

Kevin Van Gundy (01:24:37.058)
Thank you so much, Ryan. This was super fun and yeah, I look forward to hopefully doing more of these with you.

Mudassir (01:24:41.945)
Absolutely.