Episode 8: Mickey Alon and James McDermott

Gil Allouche talks category creation with two B2B pioneers who changed the game when it comes to the Customer Data Platform (CDP) category, and product-led growth approach. Panelists for this episode include:

  • James McDermott, CEO of Lytics and creator of the CDP category
  • Mickey Alon, CTO of Gainsight PX and influential in the Product-Led Growth movement

 

You’ll walk away from this episode with an understanding of:

  • the pros and cons of category disruption vs category creation
  • why most companies don’t survive to the ten-year mark
  • how to avoid common early mistakes when finding an investor

 

BONUS!

James tells Gil about a time during fundraising when his rental car got towed and he had to run clear across downtown SF to make his next pitch. It was the worst impression he had ever made on a potential investor, but he was still able to convince them to believe enough to invest!

TRANSCRIPT

Gil Allouche:
Hello everyone. Happy Friday. My name is Gil Allouche. I’m the founder and CEO of Metadata.io. This is another episode of category creators. We have James from Lytics and Mickey from Gainsight. Maybe James, you can get started and introduce yourself, tell a little bit about your career and your history and what you do today.

James McDermott:
Sure. Yeah, I’m James, I’m a CEO and a co-founder at Lytics. We’re a customer data platform, started the company in 2013, launched the first product in 2014. And let’s see, before that, I actually was running another startup in the mobile software space, which was acquired eventually by a company called Sprinkler out in New York. And then before that, I worked at a software company, Webtrends here in Portland, Oregon. And I ran at various times all the business development and corporate development and there we acquired five companies. And eventually that company was acquired by Oracle. And then before that, I’ll kind of fess up here, I was a lawyer. So I was in corporate law working for a law firm in California, Brobeck, Phleger & Harrison and yeah, that’s about it. I think I’ve been up here in Oregon, Portland, Oregon doing startups for the last 15 years. And before that, in the Bay Area.

Gil Allouche:
What a crazy transition. I’m definitely going to ask you more about that soon, but definitely an OG in MarTech. Sounds like a lot of experiences in MarTech. Mickey you’re next. Tell us a little bit about yourself. I know you from before, but for the benefit of everyone else, your background, some of the companies you worked on and what you do today.

Mickey Alon:
Sure. So today, I’m the CTO and co-founder of Gainsight PX, which is previously known as Aptrinsic, a recent startup. It’s about product experience management. Before that, I found a company called Insightera which is about website personalization. That company got acquired by Marketo. I joined Marketo for a couple of years leading their global engineering team until the Marketo got acquired by Vista. Recently Vista also acquired Gainsight. So there’s some sort of a pattern actually happening here. But in the past, I would say 10 years, mostly in startups then through acquisitions. So getting some experience both on early stage, but also in late stage public companies like Marketo reaching to 6,000 customers. And then with Gainsight we are hoping to replicate that success as well. So I’ve seen both challenges which kind of fully led me to build the recent platform that I’m focusing on. Previously coming from an engineering background, so I’ve done previous startups as well, being on the engineering side.

Mickey Alon:
During the recession in 2008, it actually kicked me to take a more business type of position which was very, very interesting. In that period, I was part of GigaSpaces. We were a very technological company and we had to cut down the company very dramatically because the major vertical for us was the financial sector. And when everything went down, Lehman Brothers was our biggest customer. And we had to basically decide to kind of turn the engineers into sales and do the business as well and work with a CTO and a CEO, but it really taught me a lot about the go-to-market, marketing sales, all that process, which for me was amazing. And what helped me really build the companies I’ve built after that. So that was really the twisting point in a recession back then.

Gil Allouche:
From engineering to the dark side during the economic crisis. We’ll talk more about that. That’s cool. Well, I’m very excited to have you both entrepreneurs and mixed backgrounds in companies and actually a similar space. So we’re meaning in MarTech, I mean, MarTech has 9,000, I think companies or at least that’s how they get counted. But it’s nice, we’re all in this big category that keeps evolving. Let’s start with something simple. This podcast is in theory and sometimes in practice about category creation, it’s for entrepreneurs like me who are newer to the game and want to create a category and do not want to repeat the mistakes of others. And so we try to understand from practitioners who’ve done that successfully, what are the steps? What are the hidden truths around it?

Gil Allouche:
I was just talking to one of the guests, Dee Anna from Invoca who was mentioning how at Yammer, they had analyst hating them. Hating them so badly because they let employees adopt software into the companies without the IT department agreeing so. And so they had all these IT folks calling Gardner and Forrester and complaining, and she said that was their hack. They actually created that noise. They wanted that to happen. And it’s basically lobbying. They figured out that if they get customers, whether they complain or praise their technology, their company to the analysts, they’re going to get a lot of mindshare. And eventually they got published. From your perspective, maybe Mickey, you can get started. Is there a tactic or a hack that you find to be something that you repeat in Insightera, in Aptrinsic and maybe in other companies about creating a category and getting that focus?

Mickey Alon:
Yeah, absolutely. I think in 10 years to go through four MNAs is definitely has some pattern in it. So it’s a lot of luck, but also placing a better bet maybe. I think I would call it category disruptors as opposed to creators. Although Marketo was part of creating a category and back then the space was noisy because it had at least 20 players. I remember the early days with Marketo, the VCs thought that the market is very, very noisy because it has 20 players. Now we have 9,000 players. But if you know that the essential truth about customer acquisition or revenue acquisition and accelerating revenue has to be more scalable and that everybody’s just trying to do it, [inaudible] led model, you know that that’s going to be a disrupting category. Using technology to get a 100X efficiency, and that’s the category to be in.

Mickey Alon:
The other element that I look at as the market, I don’t control the market. Creating a category is very, very expensive. Disrupting is less expensive because there’s a need and you’re coming with an alternative which is 100X or 10X better. So marketing was just ripe to be disrupted back then. And we saw how the demand was going up and more funding went into this market. So I find myself very good with competitive landscape. I try to be with more companies out there educating the market because I know that also longterm, it leads to the better product and better go-to-market execution will win. But I think that as a product guy, I believe that a product definitely delivers the longterm.

Mickey Alon:
And I can give you an example. If we looked at Eloqua back then it was the giant, Marketo was trying to be a player. And then HubSpot was the smallest kind of category player. Over time, Eloqua got acquired by less than a billion, Marketo got acquired twice, and then ended up being an Adobe company for 4.7 billion. And you can see HubSpot’s valuation today. And I think HubSpot did a great job with a product led go to market and the product offering. So I think over time continued to invest there led to them be by far the biggest player in the B2B marketing from revenue perspective and number of customers. Aptrinsic to me is also a future growth area because I saw that as being part of Marketo, we had 76,000 customers, and the way we try to upsell and cross dealing was so inefficient.

Mickey Alon:
We tried to use the same email type of nurturing, and we also realized as any other customer, any other company is acquiring new customers is going to be way more expensive than upsell and across an existing install base. So at this point, how do you do it better? And this is where I saw that the opportunity to lead with your product, understand the usage, correlate it with revenue and really message to your customers as part of your product experience to drive them towards value. And we know that if you use customer success manually or do like the classic marketing way, you might not be able to address the goldmine that you have as users. And you can see by the way, if you look at 2020, what happened in the market.

Gil Allouche:
I’m raising a white flag, just because it’s more than five minutes. I have to do that. We have to drink now a full glass, that the penalty for talking for too long. All of us have to, it was a tough one. I’m going to summarize.

Mickey Alon:
Yeah, to summarize, I would say I focus more on disrupting a category than creating a category, and there’s definitely signals, some you control, can you really build a technology that can give a 10X value? Second, what is the market actually right now? Is it a higher priority because you don’t control the market? So if the market is not there and you have the most fantastic product, I think you’ll not be successful at this time and you could see historically as well, many great companies just went down because the market was not ready yet.

Gil Allouche:
Oh my god, that’s maybe one of the biggest reasons, for sure. So depending on the market status, depending on your product offering, you’re saying consider twice before you create a category. Maybe you’ll disrupt one, one of the previous guests, Joe Chernov from Pendo mentioned when you were about to create a category, he said there is one question that you can ask yourself if you’re replacing a line item on a budget, then you’re an existing category. You might just provide a better product, better value. If there is a line item, maybe it’s a new category. So what do you think about that, James? What do you think about Mickey’s comment about disrupting versus creation and about that question you should ask yourself whether you should even create a category to begin with?

James McDermott:
Yeah, I think well, I would recommend trying to be a disruptor versus creating a new category because it’s a lot harder to get a company to basically create new budget for a new thing, right, than it is to say, “And we’re better than this other thing that you currently have. We can get you a 10 X return versus the two or three X that you’re going to get from that company.” Those two sales are completely different. And so I think for us, we did start a new category. I mean, the CDP category was new. Nobody was buying it. It’s still relatively new in terms of, and so I think the market just wasn’t there but I definitely think it’s a lot harder to go down the path of building a new category.

James McDermott:
I think for us, some of the things that we did to try to hack our way around the creating a new category was get the product into user’s hands, just so that they could try it and give us feedback. So I think one of the things, if you’re in a new category, even disrupting an existing category, the product led approach is just, you have to have the ability to turn feedback around and continue to iterate on the product. And that’s super important too, was make sure you know if you’re a disruptive product or if you’re trying to create a new category, who is that user, right? If it’s Pendo, it’s a product manager, if it’s us, right, it was sort of like is it a marketer or is it somebody in IT or is it a developer?

James McDermott:
And so I think you have to pick one user and really build your product for that user. And in marketing, it’s confusing, right, because you have IT people doing implementation, you have developers that are on the marketing team. You have analysts on the marketing team, you have campaign people, content people, marketing operations. And so I think anytime you’re trying to be disruptive or create a new category, who is that user? Get the tool into their hands as quickly as you can and get as much feedback as you can. And I definitely think kind of the third piece there for us in terms of kind of hacking around was we did that. Basically, we had kind of freemium offering, designed for marketers at kind of mid-market businesses. And then the third piece was we had partners.

James McDermott:
So in the marketing ecosystem, there are 9,000 companies. And so just having MailChimp say we were sort of a tool that integrates a lot of different data sets. And so we had MailChimp and Optimizely and a few of these other partners that basically put up landing pages that said, “If you want to have smarter segments use Lytics.” And they directed them to our landing page. And so we didn’t spend any money on ads. And we just had basically these ecosystem partners push people in our direction. But I don’t know. I definitely think if you’re trying to create a category, even disruptive category, it’s all about the product market fit. And so how do you get your product into people’s hands and get feedback and know that it’s something that they’ll use and that they’ll get value from, and that they love. I think that’s really the key.

Gil Allouche:
Sounds like back to basics, both Mickey and you are very fundamental in just find the customer and delight them. I want to go back to, and Mickey you mentioned something about Eloqua. I actually had Mark Organ here and he was talking about it with sorrow how he worked so hard to create a category, succeeded and then sold the company, and then someone else took over the category and did a much bigger job. And like you said, HubSpot is now continues. It’s funny, not everyone agrees on HubSpot being a great product. I actually agree that they have a great product and they led with that. But not all the guests are on the same page. What happens when you started Aptrinsic or Insightera, I’m sure there were other companies in there. And do you think about that? Do you consider am I going to create this category and then someone else is going to snatch it from me?

Gil Allouche:
Is it good when you have other… So how do you think about that when you build a company? And you had the particular experience of joining larger enterprises right after. And so that’s the unique perspective I’d love to hear.

Mickey Alon:
Yeah, I think it’s eventually also, when you do get into that market demand, which is growing and the trick is to see it early stage. Although you can always jump in, we saw Zoom jumping in into a very mature category. We see Monday.com jumping in, but that’s actually more a product. They disrupted with a little bit better product, but also a very different go-to-market efficiency. Very high scale product led go-to-market who can really disrupt any big, giant out there. So that’s what their play. In early stage, when you’re really building a category, marketing automation was a forming category. Customer success is a forming category, broad experience management like Gainsight PX, and Pendo is a forming category, but you always replace something in the line item. I don’t agree that there’s suddenly is going to be completely new.

Mickey Alon:
You’re basically replacing something because it’s not that they didn’t do that so far. They did it very inefficiently. So I would say that looking at that and looking at the execution is really, really key to nail down both the product understanding demand, but how do you really figure out the sales playbook, the repeatable model? That is something where a lot of founders fall short. They always keep that niche and they always describe their product as a super sophisticated intergalactic buzzwords and the end customer is looking for a simple solution with 10 X. And think about Tesla, is Tesla creating category of EV. I think that they’re disrupting the industry, the automotive category, they disrupt it, don’t create it, but they give you 10 X better experience, 10 X better car, more efficient on fuel and the experiences like self-driving.

Mickey Alon:
So that’s the way I think to do it. It’s really the execution of your go-to-market and then also the execution of the product and creating this learning cycle is key. And as for Marketo, it was the same challenge, by the way. I thought that they figured it out. I joined Marketo. I was a very small company. We grew very fast, but then Marketo was the unicorn. And I saw it’s the same challenge there. Actually, they figure out what’s going to be the next? It’s from quarter to quarter to figure out the next phase. And the key is that execution, the right leadership, people really have a massive impact on your business, the culture that you create.

Mickey Alon:
And then the way you outsmart your competition. And that’s where I think the longterm, it’s where if you do it better and that execution both on go-to-market and product, and you weave that, interlock that together well, you will end up very successfully, but if you’re just great on your product or just great in a go-to market, and I’ve seen both companies, fantastic go-to-market companies that just failed miserably, and then the opposite. Amazing technology product that just didn’t go anywhere because they didn’t have that interlock concept that it has to be hand by hand.

Mickey Alon:
And it doesn’t matter which size company you are by the way. Just large scale, small scale, you have to always do that.

Gil Allouche:
Thank you. James. Any comments?

James McDermott:
Yeah, I mean, in our space, we were early in the space, kind of creating the category. And then what happened was a different type of tool came in and said they were that thing and then took the category away. So I think we had a slightly different experience where we were in a space, we had great fit. We were doing exactly what we were basically helping marketers kind of run better marketing campaigns with better data sets or segments. And we were basically always from the beginning using kind of machine learning to help identify those opportunities. But then a simpler model came in with segment where it was like, “No, we don’t apply data science and we don’t help you find audiences, but we’ll just take data from point A and we’ll move it to point B.”

James McDermott:
And then they were selling into developers and developers kind of came up from underneath the marketers and said, “Don’t worry about it. We have a way to solve this. And it’s a lot easier. We’ll just grab data from here and we’ll drop it into your email marketing tool.” And then Segment, originally they would call themselves tech manager and then they call themselves customer data infrastructure tool. And then eventually they were like, “And we’re a CDP too.” And so we started getting into deals where it was like we’re an orange and they’re an apple but their Apple is really simple and the developers are recommending it. And so it became pretty challenging, the category kind of flipped and made it pretty challenging for us.

James McDermott:
The next turn of the category though because these categories are not static, is Adobe and Salesforce said, “We have CDPs. And actually these CDPs are for business users, for marketers.” And when I talked to the CEO of Segment at one point, he was like, “The market is kind of changing and developers aren’t making the buying decision for CDP anymore. It looks like marketers are, and suddenly now we’re competing against Salesforce and it’s apples to apples and we can compete much more effectively.” So we’re kind of seen this change in the category where the definition has changed. And at one point, we had fit, then we didn’t have fit because the category changed and now we have fit again because it’s like the buyer went from marketing to developer back to marketing. And so it’s a fickle thing. And I think Mickey makes a good point, which is you’ve got to continuously kind of update and navigate and think about your go-to-market and where do you fit in the category and how are you bringing value to customers.

James McDermott:
And you can’t sort of continue to flip flop back and forth. If we had just said, “No, now we service developers,” we would have missed kind of the point where we are today, where marketers are like, “No, we own this. And this is the tool that we need.”

Mickey Alon:
Yeah, I would say that there’s a statement about being resilient and being responsive to change will actually make you survive. So the survival of the fittest is basically on that. You need to recognize if the buyer’s changing, you need to recognize if there’s going to a category definition change and be flexible for that, if it’s the right thing. But as category to me, to your question, if we see more players and we see more players in the part experience manager, and we’re seeing AppQs and WalkMes and WalkMe is not a new player but AppQ is a new player or Intercom. To me, it’s good news because now it’s your time to go and execute on differentiation. It’s very difficult to go and tell someone, you need this. Why? Because this and sell all this high, this is a very long deal cycle, but I want to be in the top three they look at and then say exactly why they should choose my solution.

Mickey Alon:
And then also make sure that I execute better on the go-to-market and there’s place for everybody. What we saw with marketing automation, we thought, oh my god, now we have so many players in marketing automation doing email marketing to even same segment, but in the end everybody was growing very dramatically. It was great for the industry. It was fantastic that Salesforce built that marketing cloud, then Adobe build marketing cloud. And I think eventually it brings I think innovation, it brings growth. So many new startups, so much more value. So I’m a big believer that more players in is fantastic. And many think there’s one player takes all, but not in the subscription business in software. I feel temporarily, yes, Eloqua was the big, the 800 pound gorilla that takes all, but suddenly Marketo disrupted them with simplicity until Marketo became complex but more sophisticated and HubSpot came with simplicity and so forth.

Mickey Alon:
So it’s nice to see, and it’s very healthy for our community I would say to create that competition and create more opportunities to metadata and other players to go and optimize on top. But if we didn’t do that, I think there was no chance for 9,000 other startups to go and build that. So being flexible and being in the fight on a daily basis is what we do. And we like tough challenges. So we’re crazy enough to do that. And you need to make sure that your management is doing that. And I found Marketo management is these guys are in the battle field, unstoppable and also in Gainsight, the same management team, unstoppable, know how to learn from mistakes, fix, go better in. So I think this is a core dimension in your go-to-market to make that culture of learning fast and executing and fixing. Long-term, you’re going to see results if the market is there.

Gil Allouche:
Thank you Mickey.

James McDermott:
Yeah. One of the-

Gil Allouche:
Go head.

James McDermott:
I mean, it’s kind of funny, the Eloqua-Marketo story, I think is a good one. And I know Joe Payne and I know John Miller, so I kind of know a little bit of both sides of that story. Marketo would not exist if Eloqua had not kind of done a lot of the hard work which was, yeah, build a tool, kind of a first version of a tool to take data and put it into an email campaign and automate that process. The pain in the ass part is getting marketers to adopt a new workflow and figure out actually how to do that. I think anybody is kind of going through that right now that uses AI and ML to replace some of the things that you might do manually and marketers or any business user is like well, that’s not how I do it. I mean, this is how we do marketing automation and you’re telling me we should do it a different way.

James McDermott:
And Eloqua solved a big part of that problem by having these agencies that came in and built practices around will help you set up track one, track two track three. And part of that, I think helped them get into market, but it probably also meant that they didn’t improve their tool. They let agencies basically do a lot of that work. And then Marketo came in and said, “We can automate a lot of this. We can make it easier. The user experience can be better.” And so then you had to make a decision. Do I want the enterprise tool where I have to have an agency or I can just sign up with Marketo and it’s a little bit cheaper, but it just works out of the box better. And then the next iteration of that was obviously HubSpot, where they’re like it’s way cheaper and way easier. And so these cycles, I think kind of they tend to play themselves out in new categories.

Mickey Alon:
I think that is the secret sauce, right? It’s like you basically speak about what led me to build Aptrinsic for example, because actually I recognized the same pattern you just mentioned. The new player’s going to have a better usability of their product to do better solutioning. And then they wanted to disrupt existing player. So product led growth, which I wrote a book about that one a few years ago was this is actually the pattern, right? You’re going to come with a better product to existing market and disrupt the bigger one and that’s the cycle. And I also saw that. If you look at a company’s life cycle, five to 10 years and they disappear suddenly. And then even today, these IBMs and Oracle, these logos are not as powerful as before. Every two, three years you see the new players like Snowflake now is the hot company.

Mickey Alon:
So there’s a cycle of company and recognition. And I think that the product led growth or having that product play is the secret sauce. And my passion is to help companies with the growth type of motion because that’s what help disrupt and keep our economy going forward all the time.

James McDermott:
Yeah.

Gil Allouche:
Good for entrepreneurs. Go ahead James.

James McDermott:
Well, I was going to say, you’ve got to be able to unlock that scale. I mean you can look at so many different examples in kind of the CIAM space, right? Customer identity access management or whatever it is. Early in that space, you had Giga and you had Janrain and they were kind of battling it out and then kind of one got acquired by Akamai and the other one got acquired by SAP and then Auth0, right? A way simpler developer tool just got acquired by Okta for $6.5 billion. And so product led growth is basically what enables you to simplify the whole process from how I adopt and get a tool into my company. And that allows you to basically scale the number of customers and the growth opportunity. It’s just math.

James McDermott:
If I can get 100 or 200,000 customers like Twilio, and even if they’re not spending enterprise dollars yet, I have an opportunity to continue to add skews and grow that. So I think early companies, they spend so much time trying to get the go-to-market right and the product fit right that there’s always this opportunity for a company to come underneath. Another example is in tag management, right. You had TagMan and Tealium and you had Ensighten, these early tag managers that eventually just got replaced and then Segment came in and now there’s a RudderStack, which is an open-source version of that and more developer friendly. And I think the push is always, how do you make this easier, frictionless for a customer? And the product has got to be the piece that leads that. The old enterprise model, it only works for a handful of companies and they just [inaudible].

Gil Allouche:
Let’s take a pause.

James McDermott:
Own the customer relationship, right? Adobe, Salesforce, Oracle, they don’t really sell products. They just own accounts.

Gil Allouche:
I’m going to take a pause for a second to switch from category creation. We talked a lot about that. I want to take a break from that if you will. Both of you are entrepreneurs. So there’s a lot to learn from you outside of category and marketing and positioning. Maybe you can share each and James, I’ll give you a minute break there. Mickey, you can start. You can share a moment in your career. Mickey, I met you first time, I think in Bessemer Ventures or Lightspeed, I think it was a Lightspeed event for marketers. Since that time it’s been a minute, tell us of a big hashtag failed moment you had as an entrepreneur. A moment that was tough. You thought you fucked it up, all these years and tears and sweat, do you have something already popping on your mind?

Mickey Alon:
A ton of these moments. I think that the early stage, so first timers go through a lot more to prove and get funding. The first timers, you don’t have the pedigree that they’re looking for. And for me, as someone that grew up in Israel, Tel-Aviv coming to Silicon Valley, nobody knows you. And obviously they’re scared to put any investments. So I think for me to learn the VC route, what they expect to see, what are the signals, was a lot of trial and error. I definitely could have spent time with just mentoring, getting in touch with entrepreneurs. I think they can push you two, three years forward, just all these basic insights. So today I’ve been doing those for several companies just early stage, giving them some direction towards like, “Hey, just this is what you expect to go and do.”

Mickey Alon:
So I did do a lot of mistakes with early stage, and I remember crazy painful moments that one of the VCs told me like, “Yes, we’re going to sign and invest.” And we went celebrating Thursday night and doing that celebration, I got the texts from the investors saying, “No, we decided not to.” And I was supposed to sign a term sheet on Friday morning and these things you need to bounce back and the team is with you just doing the cheers. Literally you get this call and you go outside, you come back. And the party is basically over then that night, we actually reached out to other VCs and to keep it short, we actually found a different VC that actually said, “Yes, come tomorrow, Friday noon, let’s sign the term sheet.” Because we already had one in the bag and the second investor just got cold feet and we said, “Great.”

Mickey Alon:
The next thing that’s happened, we are in San Francisco. I was in a hotel, I gave the car in the valet parking and I was calling the car and nobody shows up, apparently we forgot to fill the car and the car was stuck. So we got late to that other meeting I think it was one hour late, but eventually there’s a good ending. But one of the story has a bad ending. You’re basically a mess up and the key is to come back again and make sure that you learn from that. Don’t try to say, “They’re wrong.” Maybe they’re wrong, but you lost the game.

Mickey Alon:
And I think it’s key and I did a lot of mistakes about positioning. I did a lot of mistake especially around the go-to-market in terms of when you’re building a company, you think about the packaging, the pricing, keep it simple, analyze the market, spend time with customers, spend less time on your decks all the time.

Gil Allouche:
Back to fundamentals.

Mickey Alon:
Oh my god. I see so many spending so much time on presentation and both decks and it drive zero value to a company in the end. And if you spend time acquiring new customers and learning their challenges and evolving with your product team, then you’re really getting somewhere as opposed to building more and more internal decks and meetings and all that stuff. So that’s something I would definitely recommend as well.

Gil Allouche:
James, tell us about your hashtag fail moments. You got some time to think about your tough time.

James McDermott:
Yeah. Kind of there’s the 10,000 hours and maybe every entrepreneur has 10,000 mistakes. I don’t know. Which one do I pick from? I mean, I have a bunch around fundraising. I have a similar story to Mickey’s where my co-founder and I, we had one meeting on one side of town, kind of near the Embarcadero and we rented a car and we parked kind of along the Embarcadero. And then we went into the meeting and we came out and I was pretty excited because of the next meeting. I’m pretty sure they said we’re going to do kind of a full pitch to the partners and everything and really excited. But I was like “Well, we’ll squeeze one meeting in before that.” We came out, the car’s gone. It had been towed and I’m like, “Oh crap, how are we going to get to the other side of town?” My co-founder was like, “Well, let’s see if we can get a taxi or whatever.”

James McDermott:
I just started running. So I ran basically, got to Market Street, ran up. I was sweating, got in, did the pitch. I looked around and there was two guys that were sleeping. And the pitch was horrible. I mean, of course I was completely discombobulated and the guy basically stopped me. He goes, “Look, I don’t feel you’re really ready for this.” And I’m like, “I’m really sorry. My car got towed blah, blah, blah.”

James McDermott:
They’re like, “Well, why don’t you come back next week and we’ll try this again.” And we did, and ultimately they did fund us, which was great, but that experience was, and then after that, of course, I had to go and find my car and it was $400 to get it out of the impound.

Gil Allouche:
You got cheap. Usually it’s double the price in San Francisco.

James McDermott:
Yeah. I know. This was a while ago. And so that was kind of a disaster. I think, I mean, tons of mistakes with teams and hiring, it’s really hard to kind of when you’re early stage to find people that fit. I think you always make the mistake early, so I made the mistake of thinking that somebody had good experience at a different company, something that you may aspire to be, would be a good fit for a startup, not always the case, right? Kind of there’s a different type of person that fits into a startup. 10-person size company, 50-person size company. And so those are painful learnings that are also kind of expensive because somebody who is an expert and brings in a playbook and tries to apply it to your business. And you’re like that’s not what we’re doing. We’re trying to do something else. But has a lot of credibility and experience, those types of conflicts can be pretty painful.

James McDermott:
We rented a place here in Portland in Old Town. And my co-founder and I, of course were pretty cheap and let’s get the cheapest place that we can find. But the place that we had was basically, if you walk downstairs and went out the back door, there were always junkies right out the door. Out the front door, there was a homeless encampment. And so we were trying to recruit different types of people to come join the company. And that was a little bit of a turnoff. That was a mistake.

Gil Allouche:
I can actually emphasize with this one. We had-

James McDermott:
It’s an unsafe place.

Gil Allouche:
Unsafe place. Is that in San Francisco?

James McDermott:
No, this was in Portland.

Gil Allouche:
It was in Portland. In San Francisco, one of the new employees asked one of the current employees like, “I noticed that you’re wearing boots, is it going to be a rainy day in San Francisco?” She said, “No, it’s just always there’s human feces in the front door. So I always have to walk around with boots.” That’s a San Francisco comment.

James McDermott:
Maybe one kind of side note is just being outside of San Francisco. In San Francisco, everybody’s in the network. Everybody works at startups, everybody knows where they fit. They’ve kind of done a tour of duty or two, and it’s like the patterns get repeated. In Portland, it’s not the same, right. You’re creating startup employees and you’re creating your own kind of playbook and you’re not in that network. And so lots of kind of painful learnings in that regard, I would say.

Gil Allouche:
It’s cool though. I’m excited to see. I agree that there are new hubs being created, especially now [inaudible] 2020. And I’m kind of excited about that to see talents from other areas. Miami, I’m just here for the week, but I see quite a bit of techies and companies. And I was sitting down in a hookah bar and heard someone talking about evaluations and up into the right kind of conversation for 45 minutes. And I was so confused because I never heard that before in the-

Mickey Alon:
[inaudible] Oregon actually is a cool place and also have so many startups I’ve seen. So many really cool places because being remote is not possible. I think one of the biggest mistake is trying to hire only in one central location as opposed to find talent. Now talent is global, way more attractive market. And you could find talent anywhere from Scandinavia to Middle East. You can really find a ton of talent. And it’s just become more and more natural for teams to work and collaborate across cultures as well. I think that’s like don’t try to hire, we would try to hire always in Silicon Valley as Marketo, it took us a ton of time and people just have different expectation, different costs of living. So if you’re an early stage startup, just do that global-

Gil Allouche:
Arbitrage, yeah.

Mickey Alon:
And you know that you’re going to do a lot of mistakes. One of the biggest mistake is not to take decisions. You have to take fast decision, not necessarily based on a lot of data. So you’re bound to have mistakes. The trick is to fix them. If you stick with a mistake and convince yourself it’s going to get better, then it’s mistake, but you’re going to do mistakes.

Gil Allouche:
I love it.

Mickey Alon:
You have bad hiring, but just change it or bad-

Gil Allouche:
Fix that. Fix them. Make those mistakes and fix them. I like that.

Mickey Alon:
Exactly. Bad product decision, fix it. But don’t stick around and just say, “No, the market will understand my product is better.” No, you did a mistake. Just fix it.

Gil Allouche:
Nice. I like that.

James McDermott:
Just recently, that is just a pet peeve of mine, which is not making a decision. Right. I mean, it’s like let’s make a decision, wrong decision, right decision. Let’s make a decision.

Gil Allouche:
Yeah.

James McDermott:
And-

Gil Allouche:
Not making a decision is making decision like you said.

James McDermott:
Yeah. Amazon has this concept where it’s one way door, two-way door, where it’s like one way door decision is you can only go in and you’re kind of stuck. And those are maybe decisions. There are very few of those, but those are ones you should ponder for a little bit. Two-way door decision is you can go in and then you can fix it, no problem. And I’m always like is this a two-way door decision? Let’s just make the decision and go. Having a mechanism that just gives people permission to make a decision even if it’s the wrong one with limited data, velocity is the key in any startup, just being able to move fast. That’s our advantage. And if you take that away by laboring over decisions, you’re going to fail.

Gil Allouche:
That’s a good segue. So Mickey started, you continued with the decision making and how that is for an entrepreneur. You must make mistakes, not making a decision is a bad decision, the worst decision in the world. What truth do you have as an entrepreneur? James you can start, as CEO entrepreneurs, what are the absolute truth or bullshits that you are aware of that seem to be common somehow and almost idioms or cliches, things that you see on [inaudible] or thing you read about on LinkedIn and Forbes over and over that is bullshit. From your experience, it’s not true at all. Do you have something that you keep seeing and you’re thinking this is not the experience I had. In fact, maybe even 180 degrees of that.

James McDermott:
Yeah. I mean, I think, well, every company is a little bit different, but I think one thing that does happen is as soon as you get investors, they have their own kind of mental model for what your organizational structure should be. And so I think that’s bullshit. There’s no kind of, “Now you’re at this size, you need a VP of sales and you need this and you need that.” And it’s like depending on your go-to-market model and your product and everything, it’s so different. So I think there isn’t a one size fits all. Now you need to go hire your head of marketing and companies that do that without kind of understanding what they really need, those are mistakes.

Gil Allouche:
I don’t know if you’re referring to the Jason Lemkin’s push for VPs, the moment he raised the series A. I think I hear some of that in there.

James McDermott:
Yeah. Yeah. I think, yeah, VPs for what reason, right? I mean, do you have a team of 30 people or 20 people or 10 people maybe. Okay. Maybe there are reasons for it, but I think just as a rule of thumb, these kind of rule of thumbs, I think you got to look at what you need and what type of organization you are and who you’re selling to. And if you’re selling to developers, right, you don’t need a VP of marketing. You don’t need a VP of sales. Those are not things that you need. So I think just thinking that through.

James McDermott:
The second one is I actually think fundraising. I love the idea that we can be dispersed. I also think that we can be product led. And if you put those two things together, it could mean that you don’t have to go raise money. So in some future life and there are companies that are very successful that don’t raise venture capital. But I think the flip side of that is a truism is you have to have velocity. It’s pretty hard to kind of really build a startup and get people excited and create momentum and maintain momentum without moving fast. So if you need kind of funds to do that but I think that may be that, I mean, I’ve raised money before, so obviously this is not… But I do know of companies today that are basically they’re product led. They’re really small. They’re really lean and they’re crushing it and they’ve got 20, 30, 40 million in ARR and they’re like 10, 15 people.

James McDermott:
That’s not impossible and they’ve never raised money. So these different business models are out there. I think we kind of get locked into one way of thinking.

Gil Allouche:
Just one better. Thank you. Mickey. Do you have any of those hidden truths or absolute truth you have experienced as an entrepreneur that are not maybe common or even the opposite narrative is the public one?

Mickey Alon:
Yeah, I think success. I think PR that you read is the biggest BS you read. It’s basically every company is doing so great, squeezing oranges. It’s like they’re doubling and doubling and doubling, and Marketo actually did good. We did double, but it was so hard. We did so many mistakes. People think that they figured out, they had a system, they followed that, boom, boom, boom. And now putting the ducks in the row, that’s not what happened. It was very difficult. It’s difficult when you’re five people and when you’re 5,000 people. It’s difficult, you have different challenges. And it’s like what you see in PR, they figure out the space. This is the group. They went IPO, got acquired. It’s all very biddable thing. It’s just in reality every company at any stage has challenges. And it’s about the people that are fixing those challenges and just PR describe a very romantic way to draw. But it draws in more new entrepreneurs that think it’s going to be, “Hey, I’m going to make-“

Gil Allouche:
Disillusionment.

Mickey Alon:
Yeah. Let’s try that. I heard a neighbor that says like… He felt he was senior enough to start. And the first thing I told him, you’re going to get hit hard if you’re really wanting to be someone that goes after that, you need to really be prepared for that because he felt very seasoned already. He was a VP for many, many years. So obviously you can imagine his first year and what he’s experienced right now, it’s like he realizes that it’s not that romantic path. You have to be committed and you have to work very hard. And I can tell you that if I look at Nick Mehta from Gainsight, he looks always super energetic and he is an amazing person, but he works very, very, very hard. It’s not squeezing oranges.

Gil Allouche:
Thank you for that. We’re getting towards the end. Our audiences are mostly CEOs and founders early stage, and then some more seasoned CMOs in the digital marketing world, looking at category creation. Since both of you are entrepreneurs, I think I’m going to go into that one first, or it may be just that one. You have a piece of advice to series A CEO. They just got kind of the first checkbox like okay, I’m not completely wasting everyone’s time. And got a little bit of safety net there. Do you have a piece of advice for them other than the fundamental that you mentioned, of course, focusing on customers, focusing on product layout, et cetera. Do you have a piece of advice to show them kind of, I don’t know how you call it, the north star, something to focus on at that stage?

Mickey Alon:
A lot of them. Do want me to start?

Gil Allouche:
Yeah. Yeah. Start and maybe say, what is your top one. The one that you, if you have to choose the one piece of advice that you think if the most fundamental for someone who just went through that experience and can they see, they see the light, but they also have a lot more to go through like you said.

Mickey Alon:
I think early stage is about also do we have enough conviction that you saw? So number one, are you from that space or you just try not to kind of really be successful financially? If you’re trying to be successful financially, and this is the reason you’re driving a startup, I think you’re going to fail. I think it’s about your passion, about solving and you really are coming from that 10,000 hours or whatnot, you saw this problem. This is what will actually get you through these ups and downs because you have some basic fundamental truth. If you don’t have that, and you’re trying that just to be cool and try to kind of do some quick turnaround and an exit, it’s not going to be successful. And so if I hear an entrepreneur saying, “I have a great idea and I worked it up for a year, but I’m not from the space specifically, and he already mentions that the exit strategy to me, this guy would fail.

Mickey Alon:
Because if you think about the exit before even starting, and you’re not really deep in that space, most chances and the first couple of bumps, you’re going to be out of the game.

Gil Allouche:
Okay. Okay. That’s advice. That’s advice, maybe don’t start if that’s… Ask yourself those questions and if that’s the case, maybe take a step back and reconsider. James, what’s your one advice-

James McDermott:
For somebody who has gotten their Series A funding CEO?

Gil Allouche:
Yeah. For many entrepreneurs, the reason I mentioned the Series A is because for many entrepreneurs, it is kind of a rite of passage.

James McDermott:
Yeah.

Gil Allouche:
Yeah.

James McDermott:
Yeah. And maybe it’s a little bit odd, but when you go and you raise your Series A especially if you’re a first time entrepreneur, you’re creating a narrative, a story out of a very small dataset, right? You’re like, “I’ve got five customers or I got 20 customers and here’s the things that they’re doing.” And if we extrapolate that out, here’s what we can do. And you’re telling a very interesting story with not a lot of kind of data underneath it. And then you raise money and that’s validation that this story is correct. And this plan that you’ve been presenting is true and will be delivered on kind of whole cloth. And I think the opportunity may be that kind of hockey stick inflection where we’re going to go from five to 5,000.

James McDermott:
But I think it’s a good opportunity to kind of take a step back and say, “Hey, I did a really nice job fundraising.” I created a very compelling story that created urgency with kind of opportunity to get on board. I believe in the company and the product and the vision that I have, but maybe I need to take a step back and as I start to think about how we’re going to spend this money, have a second viewing of what that plan should be because I think a lot of first time, I got my Series A, you believe that whole story and you just go spend, and then suddenly, it’s like whoa, now a Series B and sometimes it works, but a lot of times it doesn’t.

James McDermott:
And so the investors are incentivized to get you to spend that money and see if it works or not. You may just take a step back and take a breath, take a beat and kind of think, maybe my plan, yeah, we’re going to get to 5,000 customers. But maybe we’ll get to 500 customers and it’ll look this. And that [inaudible].

Gil Allouche:
Probably still amazing. Very cool.

Mickey Alon:
I would just say that if it’s post-rounded, I thought it’s pre-rounding, I think post-rounding, definitely, I would focus on the hiring. I think the most difficult thing for a founder, you used to find the lead selling and you’re going to be very much involved all the time in selling and product and everything. But if you’re not able to hire the right talent with you, won’t be able to scale. So your 24 hours a day are going to run out and the right hiring is the number one, if I need to choose because now, let’s say you did good on the product side, you’re focusing on the marketing side. If you did the opposite, great on the marketing side, you’re going to go. So it allows you to free up your time and double down and the talent they can hire is a full-time.

Mickey Alon:
But that’s really the number one thing I would do with hiring, the rest will follow. I think obviously I totally agree with James. You will need to go back to fundamentals, reevaluate. I would also say communicate well and be very open with VC. The more they know and educated and your job is to make them understand the game. Otherwise, they come in with this very naive kind of here’s the framework, here’s is a successful company that double and double every quarter. And I think for you, just let’s understand the space, go to fundamental. But hiring is going to allow you to scale but otherwise you see yourself drifting around.

Gil Allouche:
So hiring and strategy. And then I hear James is saying, “Hey, pat on the back for creating FOMO with a VC, take the check and then go back and try to realize what’s actually the reality is going to look I that.” I like that. I think many forget to do that.

James McDermott:
[inaudible] investors. [inaudible] that relationship is so key and having it built on kind of trust that starts right at the beginning. And the last thing I would just add to Mickey’s point is you know what you’re good at, hopefully by now. And so what you’re looking for is one of those complimentary, if you’re good at selling, think about what it is that you need to kind of compliment, or if you’re the product person, what is it that you need to compliment? And those are your most critical hires, I agree, that moment where you’re like, “I’m creating this cadre of people that are going to help me grow this business.” But find people that compliment you that are not kind of the same as you because I think that can also cause some friction because my co-founder and I, he was technical and I was sales and if we had hired another technical person, that would not have been good.

Gil Allouche:
Right. Right, right, right. Yeah. Like Brian Halligan and Dharmesh Shah.

James McDermott:
And he’s no longer a VP of product, that would have been catastrophic. So yeah.

Gil Allouche:
Very cool. I also remember Inbound in the early days and Brian Halligan and Dharmesh Shah’s duets on the stage is kind of classic. The techie and how they met at MIT and how he was shy. So it reminds me of that. Wonderful. I wrote a lot during this episode. Thank you. There’s a lot of hidden gems that you gave our audience. So I thank you for that. Thank you very much for both of your wisdom and sharing that with us as well as the funny moments. This is the end of the podcast. I really appreciate your participation.