Why did you join the Bowery Capital Revenue Council?
I initially connected with Loren in 2017. She had heard me speak and reached out for me to be a guest on the Bowery Capital Startup Sales podcast. Following this, I spoke at an event that Mike was hosting for the portfolio. I joined because I really liked Bowery’s mission of having a group of folks who could provide go-to-market advice for early-stage founders since especially at the time there weren't too many firms focused on this.
How has the customer success landscape for seed-stage startups changed in the last five years?
I started thinking about customer success back in 2014. There were very few people in the profession - broadly across tech, there were probably a few 100 people who had “success” in their title. Fast forward to today, it's a standard function at every SaaS company and many other types of recurring revenue companies. There are well recognized metrics that are used to measure the effectiveness of CS, there are well worn job descriptions, well understood organizational structures for the team, and it’s one of the fastest growing careers on LinkedIn. It's remarkable to see how much has changed over that period.
Nowadays we're seeing an increased dialogue around what CS means in a product-led-growth environment. PLG companies take on customers sometimes in advance of them paying and signing any corporate level contract which is usually the impetus for bringing onboard a Customer Success Manager. Now, you could be helping your customers when they sign up through self-serve mechanisms by swiping their credit card. That kind of user level success is a new breed of CS that can help pave the way towards even stronger net dollar retention given the way that PLG models tend to work.
What are some indicators of a healthy customer success operation?
The most important measure is net dollar retention followed by gross retention rate.
Particularly in a PLG context, sometimes founders forget that gross churn matters too. Even if many of your customers are expanding massively, if you're losing logos this can be a bad sign for your business. It could be a leaky bucket which is bad for your growth, you might be bringing detractors onto the market which means there might be people who speak poorly of your product, not to mention the lost opportunity to upsell since an account you no longer have is one that can't be upsold. This also might be a sign that there's something wrong with your GTM process and whether you are selling to the wrong customers, whether there is real life GTM fit, and potentially a question if there's a true product market fit. It could also be a signal that there's something wrong more fundamentally with your business or you're not learning fast enough how to improve the fundamentals of your business.
Most companies benefit from having a north star metric as a proxy for whether customers are getting value. It might be some kind of adoption metric that is not purely the number of logins or views, it's representative of an action that people are taking in the product that signals that they're actively getting value. Often that north star metric is the primary determinant of a customer’s health score that helps you understand and tends to predict if your customer / broader customer base is healthy.
Finally, it's important to have mechanisms to ensure you're learning very quickly from your customers. You should be able to gather their feedback easily without causing a lot of pain for them and in a way that's representative (and gives you detailed insights) as to how they're using your product and how you can improve their experience. Additionally, this feedback should provide insights into your customer success processes and playbooks and whether they are optimized. Especially in the early stages, startups should be constantly inventing and building a repeatable process by which you can predictably get customers to value and get them to expand and renew. This has to be a top focus in addition to working with them on a situational basis day to day.
What are some of the most common roadblocks that you've helped some startups overcome at the early stage?
One of my favorite things to work on with founders is category creation. This involves thinking about how to position yourself and message what you do in relation to a broader ecosystem, claiming budget within customers' tech stacks, promoting best practices that reinforce your product leadership, and building community. We often record and publish a fireside chat on my Substack that addresses these topics -- which helps the founder refine their thinking and also helps them generate PR for their company. I also enjoy helping founders prepare for board meetings, since I'm often the person in a board meeting who is considering the operational complexities to scaling a company.
What is one piece of advice that you would share with a founder looking to scale revenue at the seed stage?
I'd encourage having a good understanding of how your customers think about their budget and how it’s allocated across the various things that they could buy. It’s worth understanding how they perceive value and in your case the value that they're getting from your product. Specifically, think through how you can price in a way that's commensurate with that value, how you can explain what your product does in the context of their understanding value, and how you can sell to them over time to build the story of value creation and capture more and more of that budget over time.
If you liked “5 Questions With Bowery's Revenue Council” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog.
