What’s up, everybody? This is Courtland Allen from IndieHackers.com and you’re listening to the Indie Hackers Podcast. On this show I talk to the founders behind profitable internet businesses and I try to get a sense of how they got to where they are today, what makes their businesses tick, and how they make decisions both in their personal lives and at their companies.
Today I’m talking to Steli Efti. Steli is the founder of Close.io, software that lets startups and small businesses keep all of their sales communication in one place so that they can close more deals and make more sales. It’s also a really great example of this classic idea of pure software, created by a small team, that can scale to a ton of customers and generate insane amounts of profit.
But it also wasn’t easy for Steli to get here. He had a long and winding path as an entrepreneur. And so in this episode we spend a lot of time talking about how Steli got to the point where he could create a business like Close.io.
Hopefully this will be helpful to those of you who are just starting out and maybe want to skip a few steps by seeing what mistakes other people have made, and avoiding them yourself. That’s obviously incredibly valuable if you can do it, so let’s get into the episode.
Steli, welcome to the show and thank you so much for coming on.
Thank you so much for inviting me.
You are the CEO of Close.io, an inside sales CRM for startups and small to medium sized businesses. You’re also an expert salesperson. You’re a teacher and a mentor to many people, and you’re a very effective and, I think, entertaining public speaker. So I’ve got to ask you my favorite lead-off question here: Out of all these areas, which one is your favorite?
That’s an interesting question. I definitely think teacher. “Teacher” creates a certain image that may or may not match what I mean by it, but I’ve always loved to share what I learn, and that’s always been part of my life, even in the earliest years. It’s something that I enjoy tremendously. When I can share something I’ve figured out and see somebody else benefit from that, that gives me an incredible amount of fulfillment. So that’s definitely my favorite thing.
You know what? That was my first guess. (Laughter.) Just from watching your talks and the videos that you’ve made, it’s very clear that you are passionate about other people knowing the things that you know. Just by looking at the amount of energy that you bring to it. So I think that’s a great role for you.
Let’s zoom out here for a minute and talk about not just Close.io and the business that you’re working on now, but sort of the market that you’re in. What is inside sales, exactly, and also what’s a CRM?
All right. So what’s inside sales? You could divide the sales world into two buckets if you wanted to: field sales and inside sales. Field sales is kind of the traditional salesperson that physically has to go and visit a customer; the door to door salesman of the past. Inside sales just means that your salespeople or you are selling by sitting in your office. And it’s basically a remote sales job. You typically will either send emails, make phone calls, have web conferencing. But you are selling to a customer without physically being present in front of them. So that’s the difference between inside sales and field sales.
CRM is a customer relationship management tool, although the truth is that most if not all CRM’s out there are not really customer relationship management tools but much more contact databases or forecasting engines for sales pipelines. So they’re very heavily used by salespeople and sales organizations to keep track of all the customer data and keep track of the current pipeline of prospects, to try to forecast and understand: How many deals are we working on? What deals are probably going to close? How much revenue will this drive in the future?
Great. So hopefully for anybody wondering what it means for Close.io to be a CRM tool for inside salespeople, now you know.
So Steli, let’s say that you run into a random person on the street, and your task is that you have to brag to them about some aspect of your business. What do you brag about, and what are you most proud of when it comes to what you’ve done with Close.io?
That’s a good question, because usually, you would really have to challenge me to have to brag to a stranger.
(Laughter.) You have my permission.
If I absolutely have to. Another funny thing is because people know me as kind of, a “sales guru,” everywhere I go around the world there’s always one person that comes up to me and is like, “All right, you have to sell me Close in ten seconds. Go.” My response is usually, “No I don’t.” (Laughter.) “I really don’t have to sell you jack. I don’t have to do anything right now. You have to tell me a little bit more of who you are, what you need, and then I can tell you if we can help you or not.”
But if I had to brag about Close, I think the thing I love the most – there’s a lot about the business and the team, the culture that created all that. But when it comes to the product specifically, the thing I love the most is that we found a user that’s incredibly underserved, which were traditionally salespeople by software.
Because traditionally, CRM systems and any kind of software that salespeople had to use were written by engineers that had very little in common with a typical salesperson, and maybe not that much empathy or even liking of the typical salesperson, and were sold to high-level management that also had very little insights in what salespeople have to do and what their day-to-day looked like, and what their jobs are and their pain points.
So it was built by people that really didn’t understand the user. It was sold to people that really didn’t care about the user as well, but that it was forced down the throats of the individual sales reps.
So traditionally, you won’t hear a lot of – salespeople were not really loving software, especially the software that their companies were forcing them to use. I think that we were, and still until today, I truly believe that we are one of the few, if not the only, CRM in the space that built the CRM for salespeople first and foremost, and had an engineering team that had an incredibly high empathy level for the user, for salespeople, and an incredibly high sales IQ. They understood what sales is, and they didn’t hate it. They liked it. And they liked the salespeople they worked with, and collaborated with them.
I think that all that led to us building a very unique piece of software that truly empowers salespeople to do a better job, which translates in them helping their companies grow faster and grow better, and then personally have more success in their career, while using a piece of software for eight, nine hours a day that doesn’t make them suicidal and considering killing themselves.
So I love that we built something in a space that’s really not that sexy, not that interesting, but we built something that people truly love and people use the entire day. It’s kind of the heartbeat of their career and the growth center for the business. And we’ve been able to do so without having to make a lot of bullshit compromises. That’s the thing I’m most proud of for sure.
I like what you said right there at the end, that you’ve picked a space that maybe is not that sexy. It’s not that flashy, but you’ve built something that people love. Those are the spaces where people need to be building things that people love. If something’s already flashy and sexy, then --
People ask me all the time, “How did you, Steli, strategically decide to go into the CRM space? It’s such a competitive space, if not the most competitive category in SAS.” And I always tell them, “By not deciding or using any strategy.” If I told my former self six or seven years ago that I would be running a CRM company today, I would have punched myself in the face. There was nothing in me that looked at that space and said, “Oh, I want to go there and do that.”
We just organically uncovered a need. We built something that people resonated strongly to. In hindsight, all that made sense, but as we were doing it, it was very organic, very authentic. It kind of just happened. We didn’t really set out to go into that space in the first place.
Just to give listeners some context here, can I ask how big your team is, and what kind of revenue you’re doing?
We’re about 30 people. We’re fully remote, so I think we’re covering ten or eleven countries at this point.
Oh, cool. I didn’t know that.
Yeah. We started with a small office in Palo Alto with six people for the first two, three years. Then we started hiring really amazing friends and people that were all around the world, and eventually, we went fully remote.
Revenue numbers – we’re not giving those out publicly, but it’s many, many millions and we’re very profitable.
That’s awesome. What’s also cool is that the two of us go back pretty far. We were in the same Y Combinator batch back in 2011. It was ages ago. We didn’t really keep in touch since then, but I still never stopped seeing your name because you’ve been doing so many cool things since then. You’ve been doing a lot of public speaking. You started these profitable companies that we’re going to spend a lot of time talking about. I think all that stuff is super interesting.
But to start with, I’ve never heard very much, except for sort of the abridged version, of your past and the time you spent in Europe, and the companies that you started before Close.io and ElasticSales. I want to dive into your past. Is that cool? Can we do that?
Yeah, absolutely. Let’s do it.
Cool. So let’s go back to the very beginning, then. You were born in Germany. You grew up in Europe. What was little Steli like, and what did he want to be when he grew up?
Yes, I grew up in Germany: immigrant factory worker family. My mom moved to Germany from Greece when she was 12. She never went to school, and she basically started working in a factory at 12.
It’s crazy to think about that today, but yeah. We had a little bit of a tough time because – my mom has three sons. I have two older brothers. I was the youngest. My dad died unexpectedly when I was very young, like six years old or so. My mom ended up having to raise three boys on her own, and she did an incredible job.
How was I as a kid? That’s a good question, man. I think that I was born with a lot of ambition. That’s definitely true. I’ve always been ambitious from the get-go. I don’t know why or where it came from, but I always thought that I needed to do big things in life and prove myself and conquer the world. I definitely had a lot of drive. But I also was pretty lost, and felt a lot of friction because a lot of things happened when I was growing up. One was that we had a tumultuous time with family and sickness. A lot of people died in my family. There were a lot of that kind of drama going on. It was super negative. Financial struggles; that was a negative. And then I had a terrible time in school. I really hated school with a passion.
So growing up is kind of a dark time, when I think about how I felt as a kid. I was not a super happy-go-lucky kid. I was a very, kind of like, pissed with the world, type of a child, trying to figure out a way to prove myself to the world and do great things, but being pretty lost on that, having no idea, “What am I going to do with my life?” Because I knew school would not pan out well.
Up until the point when I was 16 or so, I was ambitious. I was always trying to figure out, “How am I going to conquer the world?” But I was also pretty lost not really knowing how to do it, and getting a lot of negative reinforcement, at least from school and teachers that I would not amount to anything in life.
That’s rough, when the people who are supposed to be guiding you and helping you are really just giving you the negative message that you’re not going to succeed.
Yeah. And it bums me out, because I feel like, when you’re a very young child, a teacher is a real authority figure. When a teacher tells you that you are not shit, you won’t amount to anything, there’s two reactions as a child you can have. You can either believe it, and buy into it, or you can rebel against it.
I don’t really know – it’s kind of a fifty-fifty lottery ticket, the way you’re going to respond as a kid. I was lucky, because I responded with, “Well, screw you. I’m going to show all of you. I don’t believe it. I don’t buy it.” And thank God. But for most of my life, I’ve been wondering: How many kids believe that story, and what does that do to a young child, if he or she believes, “I’m not going to do much in life, and I’m not much. I’m not talented. I’m not smart. I’m not capable”? That is one of the things that really bother me, but I don’t want to go too much into it.
But I was lucky, that’s what I really wanted to highlight. I was lucky that my internal reaction was to push against that story. Really, I think that was part of helping me try to figure out, “How am I going to prove all these people wrong?” Eventually I ended up discovering entrepreneurship as an option for that.
So what were some of the first entrepreneurial things that you did? How did you set out to prove people wrong?
It started with a big argument I had with one of my brothers about success and wealth. Basically, his point of view was that, to be successful and really wealthy, you had two choices. Either you would become academically successful and become a doctor or lawyer, or you had to do criminal things, and become like a drug kingpin or something.
My brother was harmless. He was 18, 19 years old. He watched way too many Scarface movies. So it came from a pretty innocent place, but still, his limited worldview was that. I hated these two options, so I pushed against that. So we had this huge argument. Eventually, he asked me a question that truly changed my life.
He looked at me and said, “All right, smartass. What is your plan for success and wealth, then? How are you going to get rich if you don’t want to do any of these two things?” And I opened my mouth but no words came out. That was the moment I realized, “Holy shit. I have no idea. I honestly don’t know.”
So what ended up happening – again, TV was one of the areas of me getting information. I watched a lot of TV growing up as a kid. I had watched – I remembered Wall Street. This is funny to think about how dumb this is, but I was thinking, “Who is really rich and who gets really rich?” And I remembered the movie Wall Street. So there were a bunch of people there that were buying and selling stock and making a ton of money. “What is a stock?” I had no idea what that meant. I had no idea about business. I knew nothing about this. So I was like, “Maybe I should learn more about stocks.”
And then I thought, “Well, shit. Where do people go if they want to learn more about something? I probably should pick up a book and try to read.” And I was like, “Oh my God. That means I have to go and purchase a book.”
That, to make a long story short, led to me purchasing the very first book in my life, and reading the very first book in my life, when I was 16. It was a book about stock investment. I think I bought it for $4.99, so you can imagine the information density in there. But it was perfect for me. I’m so glad.
Sometimes I think back, “What if I had bought a book that was just a tiny bit more sophisticated. How would have my life turned out?” I don’t know, because that book was perfect for me. I was able to read it and understand it and comprehend it. That was a real turning point that made me go, “Holy shit. This is what a business is, and these are what stocks are?” It made me go back and buy more books and learn more about it.
Eventually, the very first kind of quote/unquote “entrepreneurial” thing I did was that my mom had an insurance set up for her three sons. So by the time we turned 18, we would have a little bit of money, I think four or five thousand, to be able to afford to get a driver’s license and get our first car. She had set that up for all three of us. So when I turned 18, or even a little bit before that, I made her get the money out of that insurance, and I decided,” I don’t need a car or driver’s license. Let me invest in stocks.”
That’s how I got started. I started investing in stocks when I was pretty young. In hindsight, I thought that I knew what I was doing but I was incredibly lucky, and I made a ton of money with stocks.
Really? What did you invest in?
Yeah. Man, don’t even ask me. I don’t even want to talk about it, because it might create the impression that I had a – I read a ton of books, and I thought I had a strategy, but I did not know what I was doing. I bought a bunch of random stocks. I was reading in the news about them and trying to read their annual reports and pretend I am following some kind of a strategy of investing.
But in hindsight, I know how clueless I was. But I thought I knew what I was doing, and I invested in a time that was a big up-market, so every idiot, every chicken looks like – what is the saying, that even a chicken can fly in a tornado or something like that?
(Laughter.) Something like that.
So I made a ton of money, and I read a ton about stock investment, and then I was like, “Oh, I guess I know a ton about stocks and investing.” I started advising people on their portfolios. In the beginning I thought that I would just do this for a bunch of friends or, I don’t know, other immigrant families. I had a big – we talked about me wanting to share what I know, so I was like, “All these immigrant families, we don’t know anything about how to invest our money. We don’t know anything about stocks. I need to go out there and educate the world, and educate the poor or the lower-class people how to do that.”
But then very quickly, I got connected with very wealthy, middle-class people that wanted to give me their money to invest. So I started in the financial services industry. That’s where I learned sales and where I learned some of my strengths. That I was 18, 19 years old. I have all this gel in my hair. I have two earrings, and I’m in the south of Germany, in the most conservative part of Germany imaginable, and I’m like, “These people are not going to want to give their money to somebody like me. I have no education or nothing.”
And I realized, “No, they do. They do want to give me all their money.” I would go into these super traditional families that looked nothing like me, that would not even think about giving me an internship on one of their companies. Two hours later they would give me all their financial documents and be like, “Take these 20 folders with you and come back and tell us what to do.”
I realized people trusted me, really early on. I was like, “Holy shit. I can do something with this. People really trust me. I have a talent for creating a connection with somebody. So maybe I can build a business.”
So this how I started, and eventually I started hiring sales reps and building a sales team around it. I made a ton of money. I was 19. I was making more money a month than my mom was earning a year. I was making 20, 30K a month, and that was insane in my social circles.
That led to a bunch of other businesses, like one was a – do you know Redbox, these DVD rental machines?
One of my clients was the person that had the exclusive distribution rights for these DVD rental machines for the German-speaking market. These machines were built in Italy, funny enough. Don’t ask me why. The two manufacturers in Italy that built those machines had worldwide patents on them.
And so I had a client that became a friend that was buying these machines and opening up shops. I ended up investing in that space and building the biggest chain in Germany of these DVD rental machines, and even having one store that’s the most successful store in terms of revenue in all of Europe, for the time that we were running it. This was a special market because Germany – there was no online renting on Netflix or anything like that going on in Germany when I started that business. In Germany, Sundays, all businesses have to close. It’s kind of a Christian, Catholic thing from the past.
So people would rent out movies on Friday night or Saturday morning and not be able to get anything on Sunday, there was nothing on television. German television is terrible. And so there was a real opportunity to be a discounter kind of movie store and have a place where people can rent movies on a Sunday. And so it was incredibly successful in Germany.
And then I did a few other things. I got really into hypnosis and neurolinguistics programming and just psychology and all that. And with all my knowledge about sales, I started a hypnosis workshop company. Don’t even ask me details about that. (Laughter.) That was an incredibly fun ride.
And so those are the few other things where things that I was involved with back in Germany; all kind of bootstrapped, nothing really in technology, always using somebody else’s product or (inaudible). Hypnosis was – even that was kind of a formula of how to teach and how to give workshops that I’d learned from somebody else.
So I never created a product or a service from scratch. It was always just marketing and selling it until I had an idea for a tech company that led me ultimately to sell everything I had and buy a one-way ticket to San Francisco.
Yeah, let’s get into that because that’s a huge move. And you were doing so well in Germany that it doesn’t seem like you really have to go to San Francisco. So what was it that convinced you to pack your bags and move to the States?
It was a mix of two things. Number one, I was a little sick of Germany, to be honest, of Europe in general. I was ready for adventure. The idea of me going to a totally different place somewhere in the world and starting from scratch and being surrounded with a different culture was super appealing to me. So I was flirting with that idea for a few years.
And then I had an idea for a tech company. And I was like, “I know nothing about technology, nobody I know knows anything about tech. Silicon Valley seems like this amazing place. Maybe this idea is the right reason for me to pack up my stuff and kind of go out there, wild world (ph) and do this adventure thing and just start something completely new.”
So it was these two factors. I think I was ready to move anyways. I wanted to go and see another place around the world. And then when I had that idea that was tech-involved, it was kind of the perfect excuse to be like, “Well, I guess I have to go to Silicon Valley if I really want to build a great tech company.” So it was those two things.
And then honestly, I had a lot of arrogance and a ton of ignorance because I --
How old were you?
I’m 23, 24 at that point.
So I’m 23, 24. What do I have to lose? I don’t have a family, I don’t have any obligations. I knew if things don’t work out, I can always get another flight ticket back, so it’s not the end of the world.
And honestly, I had tasted so much success up until that point that I felt like, “I think this is my calling. I’m going to go on this adventure, I’m going to go to Silicon Valley, and then I’m going to build the next billion-dollar business and become Steve Jobs’ best friend” or something. I had this hubris about me and I had this – as I said, I had a ton of arrogance and I had even more ignorance. I knew nothing, so I felt like, “I’m probably pretty confident. I can figure this thing out.”
You had never really failed at that point, so why not be arrogant?
Yeah. I was like, “I believe in myself. I’m going to figure this out.” I don’t know. I was obviously very wrong in being able to do the things I wanted to do. My capabilities and my skills as an entrepreneur were nowhere near where I thought they were. And I had to face that harsh reality in a really brutal way.
But I was right in the sense that I knew, “Well, I can figure it out.” And it took me way longer than I thought, but I did figure it out eventually.
So yeah, I think I was really young. I had tasted so much success. I didn’t really have much to risk and I was ready for adventure.
Yeah, so let’s talk about this adventure. How did your companies work out once you got to the States?
Yeah, not that well. So the business that I came to the States with I thought would be my legacy in life. I honestly thought this was the reason I existed. And that’s pretty heavy if you’re that attached to an idea.
And then I got confronted with a harsh truth; there were a number of them. Number one, I was challenged by very simple things. So getting a work visa took a tremendous effort for me. I didn’t have a college degree, I didn’t have enough money to really be an investor, so how the hell do I get a visa? And I don’t want to get into that story, but it was a huge effort. It took a lot of energy and time and work for me to figure that out.
Speaking the language – I was always used to being able to express myself effectively. And then I came to the U.S. and anytime I spoke, I had an inner dialogue going on that was telling me, “You sound like a fucking idiot right now, you sound really dumb right now.” And I did. I did really sound dumb because I couldn’t really express myself the way that I wanted.
And for people that want to have a good laugh, there’s a video out there from my very first day in Silicon Valley. So if you type, “Steli Efti Robert Scoble interview,” you should find the video somewhere. It is the most embarrassing thing of my life, and I watch that video once a year just to keep myself grounded because it’s a terrible video. But for people that are curious to get a real snapshot of who I was when I arrived in the Bay Area 12 years ago, that’s a great video, great place to go.
So I had all these internal challenges. I don’t know how to speak, I don’t feel that confident, I don’t have friends, I don’t have family, I don’t understand the culture, I have a hard time getting a place so I can – getting an apartment, I have a really hard time getting a visa; all these challenges that I was faced with life challenges that I wasn’t used to before and that created a lot more friction than I thought.
And then there were the business challenges. I didn’t know how to attract top talent. I had no background or track record. I didn’t have a network. So I was blind, talented, well-meaning, but clueless. And all the people that I was able to assemble were also a bunch of really well-meaning, really good people that were as clueless as I was.
So we had a team of people with no experience and very low skillsets. And all these people today are still friends of mine. They’re doing tremendous now. They’re founders, they’re investors. Over 12 years, they’ve had great careers. So I had always a good hand for good people, but none of us had ever built software. My software engineer was somebody that was right out of school in Australia, was backpacking, and was like, “I want to play around with Ruby on Rails. Maybe that’s the language I should to use this app that you want to build.”
And we didn’t know what we were doing. We had never built a product before. I have never raised money. I knew nothing. And so all the businesses that I had done prior were very simple things. It’s basically like you’ve opened two pizza shops or burger shops and now you’re moving to Silicon Valley to build a software business. It’s not the same thing. I made all the mistakes in the world, and I made every mistake 10 times to really make sure it doesn’t work.
And eventually, I really burned emotionally, spiritually, financially. I was also such an idiot. I thought that you had to work 16, 17 hours a day, seven days a week. And by “work” I mean sitting in front of a laptop. I was not really that productive. I was eating terribly, I was drinking eight, nine cans of Red Bull a day.
I had this image of what a successful Silicon Valley startup founder would need to look like and I tried to be that. I thought I had to be a product CEO, so I was micromanaging the engineering team. And I’m a terrible product visionary. I’m really not a product genius.
And so I made my engineering team – every day I made them less and less productive because I constantly was coming up with new ideas and micromanaging them and telling them what to do without having any idea or any skills or knowledge or experience in that.
So I made a lot of terrible mistakes. And what ended up happening was that that first company was really dead in the water after a year, and I continued on for another four years.
It’s hard to stop when you have a company that you identify with and it’s part of who you are and you want it to work. How do you stop?
Yeah, I couldn’t because my inner formula of success was, I don’t know, every kind of cheesy ’80s action movie setup of the hero has to suffer for three-quarters of the movie until they heroically rise to the occasion.
So I thought suffering and failing was just part of the equation, part of the deal. And I didn’t want to accept defeat because I identified with a company. If that company failed, I was a failure and didn’t want to be a failure.
But eventually, I really pushed it until I couldn’t push it anymore. I was kind of forced by all kinds of factors to accept defeat. And then, honestly, I didn’t accept defeat. I didn’t say, “This company is done.” We came up with this bullshit idea that was effective. We said, “We have to take a vacation from the company.”
So we gave permission to the entire team to say, “Let’s take three months for all of us to find a job or some way of income, get back on our feet, an in three months let’s come back together and see if we want to keep doing this or not.” And obviously, after a week everybody knew nobody’s going to return to this.
But yeah, that first company was a really, really harsh failure. And I felt so defeated and burned out at the end, but it was important for me. It was an important lesson for sure.
And so after that first company, you did a lot of stuff, When I met you, I think you were working on a company called SwipeGood. And I’ll never forget you and your cofounders in your green jackets everywhere in YC. It made me jealous. I wanted my own jacket for my company. And then after that, you started ElasticSales and then you went on to start Close.io, which is what everybody now knows you for.
How did you take some of the learnings that you had from that one huge failure when you first got to Silicon Valley and apply that to ElasticSales and Close.io and the person you’ve become now?
Yeah, man. There’s so much. I think the most important thing when it relates to – or the most transformative thing for me personally was realizing that I can’t just get by by my charisma. I have to build real character. And you mentioned charisma earlier, and this triggered me thinking about talking (inaudible).
So most of my life, I was a pretty inconsistent person. And I was inconsistent because I always get away with it, because I was always able to charm my way around it or to figure things out. Even when I did my businesses in Germany, those were successful businesses. But I always had these phases where I would have a brilliant moment or a brilliant month or a brilliant week, where I just crushed it and I closed all these deals and I made all these incredible things happen.
And then I had a week or two or month where I did nothing and I felt completely in a dark hole and I kind of cancelled meetings and I slacked off and was super unproductive. I always had these super high highs and super low lows, and I was always inconsistent.
And rationally, when I looked in the mirror, I always said, “Well, month over month on average, I’m still crushing it” even doing so poorly. But on a personal level, I was never completely at peace with myself because you can’t be okay with yourself when you know how many times you’re breaking your word with others or yourself when you know you’re not living up to your full potential.
That was the story of my life for the first, I don’t know, five to 10 years of being an entrepreneur. And that was also part of my story for the first five years in Silicon Valley with my startup. The biggest change was to really focus on character and consistency and learn to overcome my moods and only do things when I felt like doing them and not doing anything when I didn’t feel like doing something.
I really learned to embrace that when I didn’t feel like doing something, I could do it anyways. If I felt really depressed and didn’t want to jump on a call or customer meeting, I could go and have a customer meeting feeling depressed or having a customer meeting in person even if I didn’t want to do it. Learning to do things that I didn’t feel like doing and learning to be incredibly consistent was the thing that built my character and really made the biggest difference in terms of the value I personally am able to bring to the table in the companies that I work in or the things that I've started.
When it comes to more general startup lessons learned, I think the biggest lesson – there were many, but some were that I needed to work with people that I had known and that were really much better than me. And I needed to learn where what my strengths were and find people that are better at areas where I’m not strong.
I’m not a product visionary, so I’m not going to pretend I am. So my two cofounders, Anthony and Thomas, they are much stronger product people, they’re developers and very technical, and they’re very different from me. And so I learned to seek people that can even out my weaknesses and truly accept myself with all my strengths and weaknesses and not try to be somebody because I feel like I need to be this type of person to be a successful CEO or founder.
It’s funny you say that, because of all the things that people in Silicon Valley pretend to be that they’re not, I think product visionary tops the list.
Oh, yeah. Oh, yeah. Silicon Valley is full, the world is full of – I think it sounds so trivial that it’s so hard to grasp the significance of this. But to me, truly understanding who you are and then accepting it is one of the biggest challenges in life. It really is.
Most of us orient outwardly and trying to figure out – “I don’t know who I am, and maybe I’m not okay with who I think I am. So I’m going to look outside and see what does the world tell me I need to be, and then I’m going to try to play that role and become that person.” And Silicon Valley is a place where people really want to be technology visionaries and product visionaries and innovators. And very, very, very few are.
Most of us are not going to be the Elon Musks and the Jeff Bezos or Steve Jobs of this world. And trying to copy that person is usually a bad idea. But we all still do it. Many people still do it, and I was definitely one of them.
So realizing who I was and who I wasn’t and being okay with it was one of the big things.
Yeah. What are some other ways that you changed as a person or maybe things that you changed your mind about?
Really culture. I remember thinking that company culture is bullshit. When I first started my business, I really had such a limited worldview. I thought all you have to do is work hard and shut the fuck up and just take all the suffering and all the sacrifice. It’s all going to pay out at the end. And when things are difficult, just do more of it. That was my way of operating. “This doesn’t work. Let me do 10 times more of this,” so really dumb.
But I really realized how important it is to surround myself with truly amazing people, to trust them, how truly important it is to create an incredible culture for the business, and that honestly, any kind of problem in my business is a people problem. If I have the right people and I give them the right tools, they’re going to solve any kind of problem, tackle any challenge, they’re going to create incredible success. If I have the wrong people or give them the wrong toolset or create the wrong environment for them, we’re going to struggle and we’re going to fail ultimately.
So I undervalued the quote/unquote “soft skills” and soft things, culture, and you really have to take care of your people. All that seemed like brouhaha bullshit to me and it was a very much black and white, “We just need to work hard and then things will work out for us.” And I think that that was a very big change.
And you mentioned SwipeGood, ElasticSales, and Close.io. This is all the same company. We started with SwipeGood, which pivoted to Elastic, which then pivoted to Close. Still the same founders, the same corporate structure.
And one of the big reasons why SwipeGood turned into Elastic and that we are – my cofounders, Anthony and Thomas and I are more in love today than we were, whatever, seven years ago when we started working together. And we have a stronger relationship than then, which is one of the things I’m most proud of.
Because in the beginning of SwipeGood, we had a lot of success and things worked out pretty well in the first six months or so. And then things stopped working. Our growth flattened out, things weren’t working as well.
And one thing I noticed was that I snapped back into that, “This isn’t working, so I just have to work harder. I have to do more of the same thing.” And what I also realized or recognized was that I was looking and judging my two cofounders, because Anthony and Thomas – they are much more engineers, much more pragmatic. They were like, “This isn’t working. Well, this shit isn’t fun. Maybe we should do something else.”
And I started judging them. I started building resentment towards them, which is something I did with my first company as well. When I felt like people weren’t working hard or were discouraged by challenges, I was very judgmental. I was having this inner dialogue of thinking, “What do they think? Do they think entrepreneurship is just fun? This shit is hard. You just have to work hard” or “What is this? I hate this attitude.”
I started building this resentment towards them in the early days. And then I caught myself and I realized, “Holy shit, I’ve done this before and I have to make a decision. Either I’m going to bully them in trying to make them work like me and act like me and think like me, and they’re probably going to burn out and then I’m going to burn out as well. And I’ve seen this film before. Or if I truly believe that they’re wrong and I’m right, maybe we just need to part ways and I need to continue with this company and they can go and do something else. Or maybe for once in my life, I should listen to them and trust them and maybe follow their lead, and maybe this isn’t working and we should try something else, and it’s not the end of the world.”
And we sat down and we had a really honest discussion. I told them about my thoughts, my feelings. I told them about the options that I see on the table. And we came up with this idea of, “We’re not quite ready to quit this. But let’s play with some new ideas. Maybe in the next three months, we’ll do three weekend projects that we could throw away just to get the creative juices flowing again and see if we come up with something that’s exciting.”
That’s ultimately what led to ElasticSales.
Yeah, so walk me through this, because a lot of people listening are in the process of coming up with an idea. They don’t have anything to work on. Or maybe they’re sort of in the situation where you are where they have a product that’s sort of plateaued and stagnated and they might need to pivot into something new.
How exactly would you guys go about coming up with a new idea and how did you eventually land on the idea for ElasticSales?
This sounds a little weird, but I think the moment that we opened ourselves up to the idea that we might do something else, we just started having creative conversations, just like, “Hey, this is something everybody struggles with. What are the solutions out there? Is there a tool that helps people with this or companies with this?”
And we just started brainstorming a lot more, even without necessarily trying to come up with an idea immediately. We had this plan that we would visit three cities; each founder could pick a city they’ve never been to and wanted to visit. We would visit them for a weekend or a week on an Airbnb, and in those cities we would come up with a great, new idea and we would work on it and then throw it away. That was the plan.
We never got to that, because as we just planned that out, we started every day to just chitchat, have ideas, have conversations. And one of those conversations was with Anthony, one of my cofounders, where we talked about sales is for most startups and scaling a sales organization is so, so tough. And I casually said, “Well, how awesome would it be if there was something like Amazon AWS but for sales?”
Like you had this massive sales organization and there’s a startup. You could just plug in and say, “Spin up five sales reps for me, here’s the pitch, here’s the kind of customers we want.” They could start doing sales calls for you, you can listen in, see real-time analytics. And if it’s working, you can scale it up, and if it doesn’t work, you can scale it down. That would be a game-changer.
I just casually said that as, “Wouldn’t that be awesome?” And then Anthony, my cofounder, was like, “Well, shit, maybe we should this. That’s an incredible idea.” And then I was actually the one that was like, “No, no, no, this is very hard. I think the reason it doesn’t exist is because it’s incredibly hard.”
And he was just ignoring me. Literally, we went from me just casually mentioning this, “Wouldn’t it be great if this existed,” to me trying to stop my two cofounders that were both engineers from proceeding with this idea. So I was like, “No, I know about sales, I’ve built sales This is incredibly hard.” And they were just brainstorming names. I’m like, “What are you guys doing? I’m saying we should not do this.”
And the next day, I see they bought like 10 domains or something and then they’re like, “Could we just cold call a few startups and pitch the idea and see what happens?” And I was like, “Guys, you’re not listening to me.”
And eventually, they sold me on this, “Well, maybe let’s cold call a few companies for a week or two. You’re really good at cold calling, and let’s just see what happens. Maybe somebody wants this. If everybody tells us that they don’t want it or if it’s really hard to do, then we’ll just stop.”
And basically, the two developers on the founding team convinced me of the sales idea, and I did that. We did sales calls for a week or two very casually. I’m like, “We’re just testing this.” And we realized after the second week, we had eight companies that wanted to pay us to do sales for them. And at that point, we were just like, “How do we do this now? Let’s pick two of these companies and just test doing sales for them. Let’s see. Can we actually acquire customers, can we do this, how hard it is?”
And honestly, we never had a chance to take a breath or look back. We started doing sales for these two companies and it worked, and then we hired a bunch of salespeople and got more clients and that worked, and we just started growing and building the business.
There’s so many things that you said that are so different than what I think most founders would do, and even that are different than what you were doing earlier. It strikes me that only a few weeks or months before this, you were the one who really wanted to work hard and they wanted to give up and you were upset at them. And now they wanted to work on this idea and you’re the one saying, “No, it’s too hard, we shouldn’t do it.”
But I really like how much care and effort and thought the three of you put into what you’re going to work on. Because if you start a business, it’s something that you’re probably going to end up working on for years of your life. But it feels like a lot of, at least the inexperienced founders that I talk to, haven’t really internalized that.
And so they spend a very small amount of time deciding what to work on, and then months or years sort of living with this decision and limited by this decision and sort of constrained in what they can do because of this idea that they chose very quickly.
And of course, it’s sort of a tricky balancing act, because at some point you have to jump even if you don’t have the absolute perfect idea; otherwise you’ll never get anything built. But I just love seeing how much time and effort you guys are willing to put into deciding on what it was that you’re doing to work on.
Yeah. And I think even more important than all of that, I knew that the people I’m working with are what matter the most. And I knew that I wanted to work with those two guys. When I started resenting them, I was like, “This is not a good idea because I think these two people are brilliant, I think they’re awesome, I love them as people, I trust them, I want to keep working with them. So maybe if I can’t change their way of thinking, maybe I need to change my way of thinking,” which was the first time I’ve ever done that.
As an entrepreneur and in business and in life in general, I was always the dominant person dictating the way things would be. And I was humbled by enough failure to be like, “Well, maybe I should follow somebody else’s lead and see if they’re right.”
And I’m really grateful and lucky that I did that because they were. ElasticSales was a big success, but it led to even bigger success with Close. And all of that wouldn’t have been possible if I just followed my historic pattern of banging my head against the wall harder and harder and harder when a problem wasn’t easy to solve, versus finding the door with my eyes.
What’s the story behind pivoting from ElasticSales to Close.io? And how do you think your new mindset contributed to that transition?
So with ElasticSales from day one, the idea was to offer B2B startups a sales team on demand. You could just plug in and we would hire salespeople out and scale it up.
But from day one, because Anthony and Thomas were both developers, we set out to write, to build software as well. The reason for the software was never that we wanted to productize the company or build a product and sell it. The reason for that was that I hated all the CRM and sales software that was out there, and I was the first salesperson we were renting out. So I was selfishly thinking, “Well, I don’t want to use crappy software for eight, nine hours of my day,” and I had two people that were developers.
So the vague idea was: Let’s just build software that’s going to allow us to scale up this massive sales organization. Let’s build software that the salespeople will love and software that will empower the salespeople to do incredible in terms of their performance. That was all there was to it. We really didn’t know what – that was the entire idea.
Now, if you had asked us, “What does that mean,” we have no answer to that. We’re like, “I don’t know. Let’s just build great software. I don’t know what that means.”
But then we had created this unique circumstance where we had what I called a secret sales lab in the heart of Silicon Valley. We had this massive sales room with all these different sales teams doing sales in different verticals for different products, different technologies, different buyers. And we had an engineering team that was sitting in the middle of it – not in a different building or a different office; in the middle of the sales room interacting with salespeople.
And it was kind of a two-way street in terms of feedback where in one way, our sales team would turn around, our sales reps would turn around and show the engineers something on their screen and tell them, “Do you see this? This is so dumb. Why do I have to do this? Why isn’t the software smarter? Why do I have to do these 12 clicks? Why do I have to deal with this shit?” And the engineers would be like, “Oh, yeah, you’re right. Let me try to see if I can fix this.”
And then the other way around, a lot of times the engineers would look at what the sales reps were doing at their screens and their desks. And they would go over and be like, “Can you explain to me why this is your workflow? Can you tell me why do you have 25 pieces of paper around your laptop writing notes? Or why do you have all these browser windows? Why don’t you use this other piece of software? Why do you do all these things?”
And developers are amazing at seeing things that seem dumb, especially when you do manual labor or a repetitive task. Developers are usually really smart with that and they’re like, “Well, I would be way too lazy to do the same thing every day, every hour. Why don’t we just do something that’s more elegant or that does this in an automated fashion?”
And I think that unique environment started to really develop a point of view it came to software. And we started truly having a vision in saying, “Sales at its core is really result-driven communication. So if we believe that sales is result-driven communication, then sales software needs to be communication software, not a database, not a contact database, but a piece of software that allows salespeople to communicate better and communicate more effectively.
So we started really creating a unique vision, and that translated in the product becoming better and better. And then that fueled the fire internally and externally. Internally, people started whispering, “Maybe we really built an awesome piece of software. Maybe one day we’re going to release this and we’re going to sell this. Maybe the software is really the future of the business.”
And externally, we were lucky because we had all these clients and customers. And some of them had internal sales teams and they supplemented their internal teams with us. So they had seen our software. They started telling us, “Hey, we don’t just want to hire sales reps from you. Our sales team also wants to use your software.”
We started hearing that more and more, and eventually, these two things came together. And I would love to take the credit again and be like, “I was the visionary CEO that decided for the right time to pivot from a services business to a product business and all that,” but that’s not true.
The reality is that Phil, who was the head of product and one of our main developers back in the day, he was the most convinced internal champion that we needed to release the software as a product ASAP. And Phil was lobbying that really hard every single day at every opportunity. And I always say that the person with the highest level of clarity in the room always wins. And I was less clear that we shouldn’t launch the product than he was clear that we should.
And I resisted the idea of launching Close because I was really overwhelmed by running a big services business and trying to scale it as the CEO. I was thinking, “This is really hard. To manage this business is really, really challenging. The last thing I want right now is to start a new business on the side to run that as well.”
So selfishly, I really pushed back. I knew we had built a really awesome piece of software. I was like, “Man, I don’t really want to run another product or another business right now.” But I was not as convinced that I didn’t want to do that as he was convinced that we needed to do it. So in a moment of weakness, literally, I was like, “Oh, fuck it. All right, let’s do it.”
Just do it.
“You take your team, you’ll get one person from our sales team to be the sales/success marketing person, support anything that’s not development. Three months we’re launching and then let’s see what happens.”
And that’s what happened. And in hindsight, that was a brilliant decision. That was an incredible decision. (Laughter.) And it changed my life. And it literally changed not just the company but also my life. But it was, again, me trusting somebody else. It was not me making a brilliant decision. I didn’t want to do that, but I gave into somebody that was really fully convinced that it was the right thing to do. And he ended up being right, and I’m very grateful for that.
So I told everybody on the Indie Hackers forum that I’d be talking to you, and I got quite a few questions. Sam Eaton asks, “The elephant in the room is Salesforce. How do you try to compete with Salesforce in the enterprise, and do you have any stories about winning customers from them?”
And I think this is a good time to ask this question, because you’re just at the point in your story where you’re first starting on Close.io. Were you worried about the competition back then, and were you worried about the long-term viability of Close.io when you had such entrenched competitors?
The truth is no. Again, I think, as I said, we didn’t really sit down and – we didn’t take this whole thing too seriously. We didn’t say, “Does Close.io have viability to be a billion-dollar business? How are we going to compete against Salesforce?”
We didn’t really do all that. We just knew with conviction that our software was awesome, and we knew that salespeople will love it because we were salespeople and were using our software eight hours a day. We knew that Salesforce was a piece of software that the individual sales rep hated. There were no salespeople that were walking around saying, “Salesforce is a beautiful piece of software that I love using all day long.” That didn’t exist.
So we thought we had something that had a chance. We didn’t really run the numbers. We didn’t do projections or research. We didn’t think how hard or easy would it be. If the story today was, “We launched a better piece of software in the CRM space and nobody cared and we failed because competition was too strong,” that story would make total sense to me, total sense to me, but it didn’t.
In hindsight I can tell you why. But when we were launching, it didn’t come from a place of strategy. We didn’t know why we ended up succeeding, so we weren’t worried about this. Honestly, and even today I’m not worried about it. There’s not a single customer that buys Close.io that is not also looking into Salesforce.
So they are a competitor of sorts, but they’re not a direct competitor because Salesforce is really dedicated to large organizations. That’s where Salesforce is the best solution. Once you have thousands of employees, you can’t get around purchasing Salesforce, and it’s the best piece of software for your organization needs at that point. But when you’re a small, a medium-sized business, it is a piece of shit and it’s going to slow you down. It’s not going to speed you up. It really is.
It’s an incredible company, and I have so much respect of what they’ve built and what they’ve accomplished and they really have set new rules for how to do B2B and SaaS and all that. Amazing, right? Amazing. But for the end user, it was not a great piece of software, because again, it was not built by people that understood the end user and it was not sold to people that cared about the end user. So you have to understand that history.
So we always felt like we’re never going to go upmarket, we’re never going to do enterprise sales. I don’t want to compete with Salesforce. I don’t want to uncrown Salesforce. As far as I’m concerned, if Salesforce stays the number-one CRM for large organizations around the world for the next 30 years, that’s fine and dandy with me. I don’t care. We wanted to become the number-one player in the SMB market, the number-one player when it came to sales productivity.
When you have a sales team where your number-one priority is to make them more productive, we want it to be the piece of software you buy. When you get to a size where you care about compliance and integrations and forecasting, when you care about all these other things more so than individual sales productivity, that’s a game we don’t want to play. That’s a thing we’re not passionate about, so we don’t really care.
I think that in hindsight, we had built a piece of software that really hit a nerve in the market and that served and underserved user or stakeholder in companies, which was the individual sales rep.
And on top of that – we didn’t know that at the time – but we also were right about creating a very different way of marketing. So we were able to create a really strong brand that resonated with people, because we didn’t try to out-advertise Salesforce, we didn’t try to out-PR them, we didn’t try to even out-sales them. We knew they have a massive (inaudible) sales organization. In order to compete with them, we would have to raise hundreds of millions. That’s not a game we want to play. That’s not a game we think we can play and win and play better than our competitors.
But when we looked at all their channels of building the brand and marketing, the weakest channel in our estimation was their content back in the day. We felt like their content sucked, and it was content written for search engines, not really for people. Nobody’s going to read this and become a fan and be a reader that comes back every day to their blog to read these articles.
So we said, “We have a little piece of software that’s unique and really awesome. Let’s focus on one marketing channel, which is going to be content marketing, coming back to the question of what I’m most at in my heart, which is a teacher. We said, “Let’s out-teach our competition.”
And we really focused on content marketing and creating thought-leadership pieces, teaching people really practical and tactical advice, how to become successful in sales. And that marketing channel really, really worked and that created a really strong brand. And that combined with our product was what allowed us to compete effectively in a very crowded market and build a big business.
And in hindsight, as I say, I can tell you how the pieces fell together and why we were able to accomplish that. But in all honesty, while we were doing it, I didn’t know that that would be a successful strategy. I didn’t know how easy or hard it would be to compete in this space. We kind of just went in there and we figured it out as we went along.
So your product struck a nerve, and you were doing so many things right with content and with the way you guys built the product initially with your engineers and your sales team working together. But was it all smooth sailing, or were there things that were difficult for you guys to overcome or challenges that you guys didn’t know how to solve for quite a long time?
Yeah. Unfortunately, the first two to three years were pretty smooth sailing. So the first three years, we had tremendous success. And honestly, it felt great. It just felt awesome. I had five years of struggling with my first startup, and then I started SwipeGood and I was like, “Oh, finally, this thing is working,” and then we struggled with SwipeGood. It was like, “God, all right.”
And then we started ElasticSales. I’m like, “All right, finally, a business that’s really working.” Then as it was scaling, it was getting more and more challenging to run a services business, hire all these people, deal with all these clients. I was like, “It’s working, but it’s a very hard business.”
And then Close was just – I don’t want to say “easy” but it just was so smooth. Every month it was growing. And we were a tiny team. And after the first year, it had surpassed the revenue of the services business and we stopped the services business and fully focused on Close. And we were competing with these other startups in our space that were 60 employees, 70 employees, 80 employees, and we were six people. And we had a better product or an equally powerful product and more revenue, more customers. We knew we were bigger than them, and it felt awesome. I have to tell you, it felt pretty good.
So for the first two, three years, we had pretty exceptional growth and things were very smooth. And then things started to break.
Here’s the main mistake we made, the biggest mistake I committed at Close. Because we had scaled a little too aggressively with Elastic and we had all kinds of people challenges during the time that we launched Close; there was stark contrast. Because Close was such a small team and so smooth in terms of its growth, I fell in love with not hiring people and being a tiny team, being a team of just exceptional talent, exceptional trust, I don’t have to manage anybody, and things just grow aggressively every single month. We’re doing much better than our competition, although they were much bigger teams. All that felt great, and I fell a little bit too much in love with that.
And then anytime somebody in the team was like, “Well, shouldn’t we think about hiring people? We’re maybe too small for the size of the business,” I pushed back with this question: “Well, do we want to hire people because we can’t be more efficient and more productive in the way we do things, or do we just want to hire people because it’s the laziest and simplest solution to some of the – is it just a lazy thing to do, ‘Let’s just hire?’ Are we sure that we couldn’t be running a better company by being a better team?”
And that’s a good question to ask, but just like any good question, you can abuse it and I did. Because nobody could ever come back to me and say, “Yes, we run at 1,000% efficiency and there’s nothing we could squeeze out of this team anymore, so that’s why we should hire.” So they all kind of went, “Yeah, I guess we could do this and this better, we could optimize here and there,” and then the hiring discussion went away again.
And at some point, the scale of the business was just crazy. The amount of customers we had, the amount of data volume – we just had three engineers, three developers. And then things started to break.
How big did you get with three developers?
How big? We had, I think, over a thousand customers. We had some low level millions in terms of revenue.
Yeah. And I don’t know what we were doing. We were doing hundreds and hundreds of thousands of calls through Close and millions of email through our system, so the data volume was just growing crazily. And then things started to break.
And I’m telling you, when a CRM system breaks, when we had a downtime for an hour or something, that’s a real problem. Because it’s not the type of piece of software that you login, you check the numbers, you log out, and if you can’t login, it sucks, it’s an inconvenience, but you’re just going to wait for two, three hours.
When you can’t login to your CRM, you basically have a sales team maybe of 30, 40, 50 sales reps and they’re all screaming at you because none of them can make money, and you’re not going to hit your numbers because nobody can do their work.
And so we started having scalability issues, the app was slow, we had downtimes. And so the engineering team went from innovating and building amazing features and really pushing the product forward to doing the whole firefighting thing and trying to keep the whole software running.
That created a ton of problems. At that point of, basically crisis, we had to decide how we’re going to react to this. And I’m glad that we had a lot of entrepreneurial experience. So we knew: All right, we could panic now and try to find a shortcut solution to this problem, which meant just hire really fast, hire a bunch of people really, really quickly; or we could suck up to the mistakes we made, swallow the bitter pill, and say, “You know what? The next year, we’re not going to have this” – we had tripling, tripling, tripling. Our growth was really crazy in the first three years.
We’re like, “Well, the next year let’s plan on having very little growth. Let’s not have any growth goal, and let’s fully focus on hiring because we know we need to hire. But we know that if we get hiring wrong, we’re just going to set us up for failure in the long term. We need to hire amazing people, which means it’s going to take a long time for us to find these people and hire them. “
“And we’re already so thinly stretched, everybody’s plate is so full, that we’re not going to be able to do all the work we want to or we used to because we’re going to have to focus tremendous effort in hiring. And we’re going to have patience. We’re going to need to, again, not be able to fix all the problems as quickly as we want to bring in the right kind of talent.”
And I’m glad we made that decision, but it meant that we had one year where growth was terrible; and also not just growth. Not terrible. We still grew 25% or something and we’re still profitable and all that, but it was not the type of tripling 300% growth that we liked to see. And even worse, we were disappointing our customers. We were letting our customers down, which that was the biggest problem. That was really what sucked.
But we used what I hope and think was character and discipline, and we toughened it out and we started really focusing on hiring. We dedicated a ton of energy and time into that. We were very patient with it and didn’t hire people that we kind of liked or liked a lot but weren’t perfect. We really waited to find perfect people, and slowly but surely, we hired incredible talent and (distortion) able to build out a team that can run a business of this size, but also invest in the business in a way where we’re able to grow in the future the way we want to.
But the biggest mistake was really not hiring early enough, and that really cost us, I would say, a year and a half, maybe two years in terms of the innovation we wanted to do, the growth we could have done. It was two years of lost opportunity, but I’m convinced that it was not a mistake that killed the company because we reacted in the right way, I think, in hindsight. And we’re seeing it now.
Yeah. It sounds like you handled it in a way that younger Steli definitely would not have. Younger Steli would have said, “Sixteen-hour days for everybody. And we’re going to not only hire, but we’re also going to grow 3x this year,” and probably just ended up digging yourself a deeper hole and not really succeeding on either front.
So it’s really just a testament to how useful it is and how helpful it is to, if you’ve sort of failed at one startup, to keep going and do another one, because you learn things and you can build on top of those lessons and become a more formidable founder in the future.
Let’s talk about sales for a bit. I know you guys were killing it in your first few years out of the gate, but were there any challenging sales stories? And what did it look like to actually sell Close.io to those early customers who helped you grow so rapidly?
Yeah, I’ll give you a good story on that. And that’s a story that I think the lesson there is really important, which is one thing we really benefitted with at Close was that we had done sales for over 200 venture-backed startups in the span of 18 months with Elastic. And those were all kind of early stage companies, and we learned a bunch of really important lessons.
And one of the most important lessons I learned then: It’s not just important to understand who your customer is. It’s equally important to understand who your customer isn’t, who’s not the customer you should be selling to.
And a lot of times, especially startups, you’ll make that mistake that, opportunistically, maybe a company that’s too big will approach you or an organization that you didn’t really quite about. And on the one hand, you need to be open-minded and assess, “Maybe there’s a customer that I have a solution that’s much more powerful for,” and that’s awesome.
But oftentimes what startups do is they’ll get blinded by the allure of, “Wow, this is such a big company. If they buy our software, maybe they’ll acquire us, maybe this is going to be a game-changer, maybe this is going to mean all this kind of revenue.”
But you need to really be honest in asking yourself, “Can we really support this sizes of a customer? Can we afford acquiring them? Can we afford supporting and servicing them? Are they going to pay us enough to make this worthwhile? Do we have experience in this?” These are questions that startups don’t ask themselves.
So for us, thankfully, at the beginning of Close, we knew we didn’t want enterprise clients. We didn’t want really massive companies. And there was one company – it doesn’t even qualify as an enterprise company, but it was like a tech company that was already like a unicorn type, already maybe a thousand employees and billions in valuation, and not yet a company that was generating billions in revenue and was more established, but kind of on that unicorn trajectory.
And they reached out and their logo was very appealing to us, obviously. And they reached out and they told us a little bit about why they wanted to buy our software. And we told them early on – I personally was working that deal. I told them, “Listen, we’d love to work with you. This is very early days for us. We’re not sure we can support a team of 20 or 30 sales reps. I don’t know what kind of needs you guys are going to have, and I want to let you know if you can’t purchase this, pretty much self-serve and run with it the way it is today, then maybe you should be looking into something else.”
And at the beginning, like all of these types of customers are, they’re like, “Oh, no. We’re super cool, we don’t need any extra stuff, all is good,” yada, yada, yada. And I was like, “All right, fine, then let me give you a demo, let me answer your questions, and then you have everything you need to make a buying decision.” They came back. I passed it onto somebody on the team to support them and answer their questions. And they came back with a few questions here and there and (inaudible).
And eventually, they started making requests. “Well, we really would buy this and we can bring all this revenue to you and our logo is really valuable. We only need you to build this one little feature you don’t have right now. It’s impossible for a CRM to exist without this feature, and we really believe you don’t have a future without it, and we’re pretty sure you’re going to build it anyways. But we need you accelerate that in your product roadmap.”
And the junior person on the team was like, “Oh, my god. Should we really change everything and let’s do this?” And I went back to them and I told them, “Hey, I totally get it, but this is not something we’re going to build in the next six months. This is definitely something we’d like to build eventually. If this is an absolute must-have, we’re not the right solution for you.” At that point I’m thinking, “They’re probably not going to buy.”
So what happens next? Something that happens oftentimes. Well, they just ignored that and they came back with a bunch of other requests. “Well, we really need this, this, and the other thing,” whatever it was. I don’t even remember. And again, I pushed back on all of those because of the experience that we had. The three years earlier, I would have had such a desire to close the deal. I’d be like, “Yeah, we’re going to work on this. We don’t have a timeline, but I promise you we’re going to have it.” I would have bullshitted them.
But I was just like, “No, no, and no. We’re just not doing any of this.” And again, they ignored all of this. For a week or two they went silent and then they came back and said, “All right, we’re willing to accept all your shortcomings, and we’re willing to buy this with all our amazingness, but we need a much better price.”
So they started negotiating on the price. And again, it’s not that I’m so awesome or anything or that I’m a hard ass that always wins all deals. It’s not true. When I push back so hard on a deal, 50% of the time they don’t buy. But the funny thing is 50% of the time they still buy, and I’m always surprised by that.
Because at the end, I pushed back and I told them I can’t give them the price they want. They told me, “Then we cannot buy. This is a line in the sand. You have to move a little bit in our direction or we’re gone.” And I said, “Well, then have a great life and hopefully down the line we can work together.” And the next morning, we get a notification, whatever, a chat solution we were using at the time, it was like, “Bing. Company Xyz just put in their credit card (inaudible).” (Laughter.) It was such a funny feeling.
This has happened many, many times over the last few years. This year in January, I had to renegotiate with our largest customer, the deal they had. They had a three-year contract that ran out, we needed to renew, they have hundreds of (inaudible). And they had a deal that was not sustainable. The profit margin was not good enough for us with their growing needs and the way they used the API and all that.
So I had to have a really uncomfortable discussion telling a really good customer, “Hey, listen, my friend, we want to keep you for another three years, but the price is going to go up by 20%.” Not an easy conversation to have. And we negotiated really hard back and forth. The founder of that company is an awesome company.
And again at the end, there was a line at the sand he told me they’d leave. And I told them I don’t want them to leave, but I don’t think it’s a healthy relationship if we maintain the structure as it was. So I’d rather help them off board them to another client where they can have the software they want and that vendor can be happy, because we can’t work because this deal is not good enough for us to support you guys well. And again he said, they’re not going to buy, and then the next day he sent me the signed contract.
And I’m always surprised by that because this is not the way I would negotiate. I would not tell you. I would maybe suggest that I’m going to leave. I would maybe leave it in the room, but I would never say, “If you don’t give me price x, I’m not going to buy,” because if I say it I mean it. I’m going to be honest.
So I’m always surprised when people tell me, “If you don’t give me this, I’m not going to buy.” And I tell them, “I can’t give you this” and then they buy. It’s always surprising.
Well, it’s got to be a little bit awkward after that because it’s like, “Hey, last week you told me that you were going to quit, and here you still are.”
Yeah. “We’re going to pretend this never happened.” But the reason why I wanted to bring up that story – it’s not always going to work out. But the reason I wanted to bring it up is because in the early days, you might get pushed around. I always say, “You don’t want to be in an abusive relationship with ta customer.”
So if they start out by demanding all kinds of things and pushing you around, it might be a good idea not to get them as a customer and get somebody that’s a much better customer for you, especially in the early days, than to try to get any customer and every customer you can. Because if you get the wrong customers, they are going to mess up your business. That might be the beginning of the end for you.
So I want to ask about even earlier days than that, because a lot of people listening are developers who don’t have a product. And I think what happens is oftentimes developers don’t understand sales or are maybe a little bit antagonistic towards sales. And so we limit ourselves to choosing ideas to work on that won’t be sales-intensive.
Are developers right to be afraid of sales? And if not, what should we know that we don’t?
So the answer is no, obviously. The answer is also – so here’s what’s important to know: Sales is not just a sleazy, extroverted, charismatic person that’s very loud, that makes promises they don’t keep, that lies, bullies, and schmoozes the room, and that’s the way they bring in money or they close deals. And when you look at them from a developer point of view, you go, “Well, I’m nothing like that person. I don’t even like that person, and I don’t like to do the things that person does. Hence sales isn’t really for me.” I totally get where people are coming from and why that’s kind of the way some developers think.
But sales really at its core is nothing else than result-driven communication, meaning when you communicate either verbally or in writing or in whatever way possible, when you communicate with another human being and you’re trying to come to some decision, conclusion, or conversion, something needs to happen at the end, you’re selling.
And sales is really all-encompassing in life. Hiring people is nothing else than sales. They sell you on them; you sell them on your company. Getting a job in sales, finding a significant other has a lot to do with communicating in a result-driven fashion. You’re trying to accomplish, you’re trying to make this other person like you, want to be in a relationship with you, or be attracted to you and vice versa.
There’s all kinds of areas in life where you’re selling or you’re being sold to even if there’s not a obnoxious person in a suit in front of you. And so when you realize that, you realize that you can learn the ABC of sales.
To me, one of my favorite examples of this is Patrick McKenzie, or Patio11 as he’s famous on the internet, because he is a developer and he’s a very geeky developer. He’s a very nerdy guy. He does not look anything like me, he doesn’t speak like me, we look like very different people. But he’s a very good salesperson and he as a developer eventually figured out, “Hey, if I want to build businesses, if I want to be independent, if I want (inaudible), I need to learn how to market and how to sell, and what is marketing at its core, what is sales, what’s the building blocks – just like an engineer.
And he figured that out. He read a little bit about it, he credits me to some degree, which is awesome, to some of his sales strategies. And he looked at some of the stuff very rationally and figured out, “Well, that’s not that hard and it makes kind of sense. And if I learn this skill and apply it, then good things will happen to my products and good things will happen to my companies and the things that I’m involved with.”
And he’s an incredibly effective sales guy, although he doesn’t wear suits. He’s not flashy or charismatic or really loud. But he understands, “Here’s how I communicate with another person to try to make something happen, and here’s the ABCs of sales to help myself succeed and my product succeed.”
And the end of the day, if you’re a developer and you want the software that you’re writing to be used by people, you’re going to have to sell in most cases. Now, selling can have all kinds of forms. Maybe you’ll have to send cold emails or have cold calls or do live demos or screen shares to show people things and convince them of things and convince negotiate contracts. Maybe your way of selling is going to be to write up a really good pitch on a website or on a blog or on some kind of a landing page and write an ad, or come up with some way that people will figure out what you do and be convinced that they should use it and give it a try. But you’re going to have to communicate with other humans.
And so if you take a very pragmatic point of view and you understand that you don’t need to have a sales background and you don’t need to be a certain personality type to be effective at sales, I think that opens up a whole new world. And I find the developers are incredibly good sales people once they open themselves up to the possibilities.
As someone who teaches people about sales, both as, obviously, something that you just enjoy doing but also as a part of your strategy for your business, what’s the best way for a new founder to learn more about sales? Should they be reading blog posts, should they be going out and learning by example, are there books that you recommend? Where do they even start?
So selfishly, I’d say – selfishly and non-selfishly, if somebody’s gotten to this point of the podcast, first of all, thank you – (laughter) – for your attention and props to you. And on top of that, if at this point you’re listening to us and you’re like, “Yeah, I do want to know more about sales. Thanks for asking this question. Where do I go? How do I do this,” I would say send me an email – firstname.lastname@example.org – and just put in subject line, “Bundle, motherfucker.”
And then what I’m going to do is I’m going to do is I’m going to send you an email back with one link. Click that link, and what you’ll get is a nice little folder that has all my books and all my templates and all my best stuff really curated in nice little form factors for you to read and consume different type of sales content.
I do honestly believe that we have as a company the best sales content out there, especially for people that are starting out, especially for people that are startup people, that are developers, that are engineers. I do think that I our stuff is not pretentious. It’s simple, it’s very actionable, it’s very short. So you’re going to get a lot of resources that way if that’s your thing, if you want to read a little bit to figure out what are the ABCs of selling and how do I get started.
But then sales is really an applied science, an applied sports. So the best way to learn sales, become better at it, is to practice it. And you can really – once you learn a little bit about what is selling, then how to practice it is just getting in front of people either in person or through their inbox or through all kinds of other means and just testing and trying. “Hey, I’m trying to convince this person of my idea. How well did I do? Hey, I’m trying to get them to agree with me on the next step. How well did I do?” And also get comfortable with rejection, which is one of the biggest parts that makes sales so tough.
Sales is very simple. What makes it complicated or challenging is that you have to deal with rejection. You have to deal with your pitch or your conversation not working out; somebody rejecting you, somebody having objections, somebody going silent on you and ignoring you. And all that doesn’t feel good. But the more you do it, the more you build up some resistance and you build up your muscle in it, the better you get at it. And you can’t really succeed in anything if you’re trying to avoid rejection. So sales is a really good contact sport to do that.
So you read a little bit about the basics, and then you start practicing. And even if you don’t have a product and you want to get better at sales, just try to explain a certain product you’re using or you’re passionate about to people that know nothing about it. Call your mom and tell her about some complicated piece of software you use. And now try to figure out: How could I give her an elevator pitch that explains to her or him, my dad or grandfather or whatever, cousin, somebody who has no idea about this, how do I convey the core value prop here?
And when they come up with their objections – “Well, how does it really work, and well, what would it cost, how do I manage that” – you could practice pitching even without having a product. You just pick a product you like. You start explaining it to people in a way that converts them to understanding, and that could be a first step. But you really just practice every day a little bit, and over time you get better and better at it.
I love that advice. And I think for a lot of people who are listening, they could potentially kill two birds with one stone here because they’re trying to come up with an idea, and maybe they could do what you’re recommending and send these cold emails an make these cold calls and actually try to practice delivering a value proposition to people and handling objections, while at the same time testing out some of the ideas on their idea list and trying to pre-sell them before they start writing a lot of code.
So hopefully, they will email you, Steli, and include “Bundle, motherfucker” in the subject line and get your recommended content.
There’s a whole book on how to sell something that doesn’t exist yet, which explains exactly what you just described. So if somebody listens to this and says, “Oh, I want to try this pitching ideas before I start building them,” there’s an actually dedicated book that explains this in detail.
Awesome. Well, I have taken up far too much of your time, Steli, and you’ve been a gracious guest for allowing me to do so.
Can you tell listeners where they can go to find out more about you and what you’re up to and Close.io and anything else that you want to say?
Yeah. So again, thanks for listening. I really appreciate people’s time. It was awesome chatting and catching up with you, Courtland.
So for people who want to know more, for those that love podcasts, I do have a podcast with Hiten Shah, who’s an amazing founder and is somebody who comes more from a marketing perspective, more from a sales perspective. We have a podcast called The Startup Chat, so you can go to TheStartupChat.com to check out some episodes or subscribe to the podcast if you want to listen more to that.
Thank you so much. Most of my content is basically published on the blog twice a week, Blog.close.io. And then I always love to hear from people. There’s so many, especially so many Indie Hackers and single founders that have been awesome enough to kind of make me part of their journey and ask for advice once in a while and have me help them close big deals or close their first customers and get through those kind of different milestones. And I get a lot of quality of life from that.
So if you ever have a question or need or just want to share some feedback, something that you heard today that didn’t work at all when you tired it or that worked really well, either way I always love to hear from people. So you can always get just personally in touch with me at Steli@Close.io.
Thanks so much for coming on, Steli.
Thank you so much.
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