104. Why marketers make the best startup founders with David Hart

David Hart
00:00:00

I think we spend a lot of time thinking about the answer and not really much time thinking about the question. We're taught to kind of like, you know, the question's easy, just what's creative is the answer.

But actually if you put more effort into what the question is, so what are you really trying to solve for the ultimate end user? And actually, if you can spend more time thinking about that than saying, hey, I've got a great idea how we can use this technology.

Dom Hawes
00:00:22

Rule number one, you are not the customer.

David Hart
00:00:24

Because of my background, they'll say, oh, I've got this great idea for a SaaS business. Can I show it to you and you can tell me what you think?

Yeah, you can do, but it's kind of a relevant what I think because I'm not your customer, you know, I could blow smoke up your ass if you want me to, but actually you'd be much better off talking to an actual customer than me.

For B2B SaaS, unless it makes people money, saves people money or keeps them compliant, anything else is a nice to have and you're never going to scale that.

Dom Hawes
00:00:57

Hello and welcome to the Unicorn Marketing Show. Now today I've got a real treat for you.

I'm going to talk to you about how you could be the next SaaS leader and how you can build your own software business and make millions. Now, the reason I can do that is because today, today my guest is the extraordinary David Hart. Now, David Hart has been there and he's done it.

He's written a book about it called Productized. And he is coming to us today to talk about why marketers make excellent entrepreneurs. I first met David about 25 years ago.

We were actually competitors at that time, but we got to know each other and liked each other. We worked together for a year and then we went in different ways.

He went off to start an agency and from that agency he built a business called ScreenCloud. And that business grew to 20 million ARR and is still going.

And when David got back from the usa, he and I got back in touch and I thought that you might like to hear from him. So this is how our conversation went down.

David Hart
00:01:55

Happy to be here.

Dom Hawes
00:01:56

Back in the day, like before the millennium, if anyone can remember or if you, if they were born there, we were. We were in opposing companies in London.

David Hart
00:02:04

Yeah, we're kind of competitors in a kind of industry that wasn't particularly competitive because there was so much money floating around. And it was the, yeah, the dot com boom before its inevitable bus, the Incubator world. Yeah. So, yeah, my company was Brains park. And you.

I don't know who invented the park or the spark thing, but you were Gorilla Park.

Dom Hawes
00:02:25

Gorilla park, yes, indeed. Yeah.

I noticed actually these days a lot of people who were my colleagues at Gorilla park have airbrushed it from their CVs, really, where it's like the whole incubator thing was a slightly embarrassing thing to admit having belonged to, because it was so mad.

David Hart
00:02:37

Yeah. I mean, we were talking earlier about some of the money that was, the budgets that we were given to do parties and things like that.

And I remember at the time thinking, this is absolutely cr. I love it, but I will never see anything like this again. And sadly I never have because it was so much fun at the time.

But, yeah, really unrealistic as a sort of sustainable way of going about things.

Dom Hawes
00:02:58

It was.

But you see, what I quite enjoyed, though was I think we started 16 or 17 businesses at Gorilla park and seeing all of those things go from idea through to almost viable business, I think. And it was a portfolio game. So I think we were saying earlier. I think we both each had three or four businesses that went on to do really well.

David Hart
00:03:15

Yes.

Dom Hawes
00:03:16

So the business model actually was perfectly good. Yeah, we just ran out of money getting there, I think.

David Hart
00:03:21

Yeah. And, you know, sentiment changed and. Yeah, we managed to IPO, actually, just. We just IPO'd just before sentiment changed.

So I think you had lastminute.com and about two weeks later we floated and I think everyone at the time was going, hang on, lastminute.com is worth how much? And it. Yeah, it was kind of the beginning of the end, really, but blimey.

Dom Hawes
00:03:41

And then we had a very short period where we sort of coexisted in almost an agency.

David Hart
00:03:46

We kind of had this notional idea, hey, we should come together and create a bit of an agency. I think I had, had. I had one client that was Pearson and I was pretty much just working for them and then just billing it through the company.

But it was, you know, I think you and I both probably felt the same. It's like we. We want to kind of do something on our. We want to build our own thing. Yeah.

I then actually went to work for an agency, so I kind of went back, went to work for a company called Reading Room, which people might have heard of. They were soho based agency. I met my two co founders there.

Dom Hawes
00:04:15

Okay. For Cogent.

David Hart
00:04:16

For Cogent, which was the agency we. We then started in 2004.

Dom Hawes
00:04:21

It was a good agency. I mean, I was following, following it, saying, shit, why didn't I just hang on to his coattails? But I remember following. I remember following.

You did some really cool work there, but you at one point then decided with your co founders to change the business model.

David Hart
00:04:35

Yeah.

Dom Hawes
00:04:35

Away from being an agency, towards being a product company. Talk to me about that.

David Hart
00:04:39

Yeah, So I think we flirted with products from quite an early, early stage, actually. We. I think the thing that worked well for us to start with was mobile apps.

And it was just because we had a team that were building in Flash and if you remember, Flash kind of disappeared and we were like, what do we do with them? Do we make them redundant or do we kind of do something else with them?

So we said, right, you know, learn how to do mobile apps, because that was the thing that was coming along. And they did. And just to, you know, they just launched a kind of. It was a phrasebook app. We called it a language app.

It was called Learn Thai because we had a load of developers. We had an office in Bangkok and.

Dom Hawes
00:05:17

It did really well, really strategic. You thought about, where's the market opportunity here?

David Hart
00:05:21

Yeah, accidentally. It did quite well.

Dom Hawes
00:05:23

That's fantastic.

David Hart
00:05:24

And we also, because we've done quite a lot of work in the agency for CBeebies, we also decided to create some kids apps as well, and they did pretty well.

So I remember there was one time at Christmas, it was a Christmas that everybody had been bought iPads, and we came back after Christmas and suddenly our revenue had gone through the. Through the roof. And I kind of like, man, we've.

We've made more money from these products than we actually pay ourselves individually as owners of the company. I was like.

And it gave me an insight, I think, into the potential for scale, the potential for generating revenue when you're not necessarily in the office doing stuff so you could sell. It didn't make any difference to us whether we sold one app or a million apps. It didn't make any difference.

It made a difference to us in terms of revenue, but in terms of the costs to us were negligible. So, yeah, I think that was the thing that it started the bug, if you like.

And initially we kind of thought, well, we'll just build a portfolio of products. And it was kind of this idea of great. It can level out some of the peaks and troughs and it's another revenue stream.

And didn't really think much beyond that. And then I think, yeah, as time went on, we decided we were kind of done with the agency world and we really loved product.

I think I said, yeah, I think we did 15 products in all. And we saw really, wow. We. So, yeah, but a lot of them were rubbish. But we sold four of them, which is good. To private equity company.

To some private companies. And then we were kind of thinking, well, maybe this is what we do.

We become a product studio and we have a portfolio of products and we started talking to investors. And I remember taking this investor out. I met an investor somewhere, I can't remember where.

I said, can I take you out to lunch and buy you, you know, buy you lunch and pick your brains? And I'm thinking, I'm going to tell him this great idea. And he just went. I said, yeah, so we're going to.

Can have all these products and we're looking for funding to invest in all these product ideas. And he's like, no one's going to invest in that. I was like, really?

Because why would I, you know, why would I give you the money to go and decide what you're going to. That just doesn't work. So I was like, oh. And it made us kind of think, you think again.

And eventually we said, look, if we're going to do this, I think that probably the way to do it is to focus on one thing and sell our agency and just focus on this one thing, which was ScreenCloud, which was a SaaS business. We ended up.

Dom Hawes
00:07:50

That's a big decision.

David Hart
00:07:51

Yeah. And it, and it makes it sound like it happened overnight and it didn't.

I think the big thing that we decided was that we were going to be a product company and not an agency. That was the first thing that we decided.

I think once we had that decision made, then that was our kind of North Star and we were just focusing on that. We're going to be a product agents, product company. We don't quite know what that will look like, but that's where we're going to end up.

And I think as we had more discussions with people, we realized it will always be a side project. If it's a side project.

Dom Hawes
00:08:19

Yeah.

David Hart
00:08:20

And we. One of the products we had was a SaaS company tool called Twillert, which is a Twitter monitoring tool.

And it got up to about 30,000 pounds in monthly recurring revenue, which is great. But, you know, it just never got beyond that.

And actually it started to go plateau and go backwards and it wasn't really until we properly went for it that things moved. And that's what happened with ScreenCloud and it, you know, today, ScreenCloud's like, north of $25 million in annual recurring revenue.

It obviously the best financial decision we ever made. It is scary because you're kind of. There's a point as well at which you kind of. There's no going back.

So we were raising money and we went to see a VC and they were like. And we decided we were going to sell the agency, but obviously you can't just sell an agency overnight. And we were kind of.

So he said, this is interesting. ScreenCloud. So what's this cogent thing? And you're like, ah, don't worry about it, we're selling it. And he's like, interesting.

I need you to sign a side letter that says you haven't sold it by the time I put my money in. You have to close it down.

Dom Hawes
00:09:24

Oh.

David Hart
00:09:24

So, yeah, so it was kind of like, okay, well, this really is the point of no return at that point.

Dom Hawes
00:09:29

Wow.

David Hart
00:09:30

But, yeah, so those kind of moments were quite scary.

Dom Hawes
00:09:32

When you made the decision then to switch, did you, did you have recurring revenue or were you still on in development and kind of early market?

David Hart
00:09:41

I don't think we were at recurring revenue by the time we made that decision, if I'm honest.

Dom Hawes
00:09:45

Big leap then. Big leap.

David Hart
00:09:46

But we were, we were pretty confident that this was a good idea. And I think we'd also got to the point where we said, you know what, we're done anyway.

We either close the agency down and go and work in a pub or we go and do this other thing. Because I think we were just done with the client stuff.

Dom Hawes
00:10:01

That's really good foundation, I think, for what we're going to talk about today. Now, the reason I asked our team to get in touch and bring you back in. You wrote this book, Product Ice. You talked about the whole story.

We have four copies of this which we're going to give away at the end of today's show. And you've very kindly signed them. Thank you very much. I actually have a fifth copy, but I've read it, so whoever gets that one, it's already read.

Productization is much on everyone's lips at the moment. I think, you know, the agency or the client agency relationship is changing.

That kind of dreaded in housing thing that, you know, it's a pendulum, isn't it, that swings backwards and forwards. But I think agencies and clients are looking for a different type of relationship.

And I think one of the things that excited me about what you've done is this is we're not talking about physical product. We're not talking about package time because both of those obviously are product.

So one of the big trends in agency at the moment is to productize service, but that's still time based. Even if it's, even if it's sold as a product, it's still time based.

And, and after our paths diverged in the early noughties, I got into product company physical products. And that comes with a whole other load of other headaches like inventory and supply chain and all that other, yeah, crap digital products.

Totally different, of course.

And so today we're going to explore, I think, why we think that or why you think particularly that marketing people generically, but agency people specifically make really good SaaS founders. Before we do that, let's start with some of the challenges that you faced in the early days of ScreenCloud.

So we've got the foundation, you've sold the agency, you're now 100% SaaS business. You've got to go build a market, build an audience. Talk to me about the challenges.

David Hart
00:11:42

One of the big challenges obviously is that we had no idea what we were doing.

And as an agency founder, I think you do have certain superpowers that give you an advantage over someone who's maybe just come out of business school or something like that. But nevertheless, there were things that we didn't understand about SaaS.

We didn't really, I didn't really understand quite how compounding revenue would grow.

And I remember when we first started and we did maybe $400 in the first month and 600 in the second month and I was like, man, at this rate, it's going to take a century before we get back to the revenues that we were generating in our agency. And it was pretty scary. I didn't realize quite how those things ticked up.

So, yeah, I mean, the big challenges for us was a not really understanding that much about SaaS. When you're an agency owner, you're, you're selling in much more of an enterprise way.

You're going in, you're meeting the client, you're kind of doing discovery. We were selling $20 per screen per month product with maybe, I think the average value was about $60, $65.

So you couldn't afford to do that, so you had to automate everything. So there was a load of things that we had to learn around that.

You know, your, your customer acquisition cost has to be really, really low if you're only charging 65 bucks a month. And so yeah, we just had to kind of figure out how we were Going to drive customers, how we were going to automate them through.

We gave, we did it as a free trial. Yeah, so lots of things that we'd never done before.

I guess more of a kind of mass marketing as opposed to your more account based marketing that you might do in an agency.

Dom Hawes
00:13:16

My experience of starting things is there are wise old sages who tell you it's a really dumb idea. No one's ever going to buy it, it's not possible. Did you have any of those naysayers that you had to screen out?

David Hart
00:13:27

The unique thing about us was that we were coming at it completely from a software perspective, whereas the industry as a whole was hardware vendors. So really they were selling screens and media players. That was their thing. And software was a bit of an afterthought.

And we were like, well, hang on a minute.

The thing that got us to think about this as a product is that at the time everyone was buying these Fire TV sticks and Google Chromecasts and making their TV SM art. And we were like, well, hang on, we can watch Netflix on our TV at home. Why can't we put stuff on our screens in the office?

And that was the kernel of the idea. And so we just said, right, we're just going to build something that works on an Amazon Fire TV stick.

And I remember we went to a kind of conference and lots of people there talking about bevel edges and pixels and stuff like that. And we were like, oh yeah, we're just going to do these things on these weedy little sticks.

And they were like, kind of almost like patting us on the head saying, good for you with your little niche idea. Good luck with it. You know that's never going to work.

No, you can't run a professional digital signage network on an Amazon Fire TV stick because that's a consumer product and you need these $10,000 commercial products. And we were like. But obviously in our naivety we just thought, well, you know, I think, why not? Yeah, let's just, let's do it.

And actually what it turned out to be amazing because lots of other people were thinking the same thing. And most of our customers in the early days were greenfield.

They'd never done digital signage before because it was prohibitively expensive and cumbersome. And they were probably saying the same thing as us, like, hang on a minute, these little things, can't we just do stuff on that?

So there were naysayers and actually, probably if we'd been more, if we'd known about the industry a bit more, we might have been put off because we might have thought, oh God, you know, nobody, we look like idiots if we try and build a digital signage network off these consumer bits of hardware. But then 12 months, 18 months later, everybody was copying us.

Dom Hawes
00:15:26

That's a superpower. I think sometimes when you go into market, sometimes we're going to talk about validating ideas a little bit later.

But I think sometimes you don't want to over validate because I was at an event yesterday actually where people were talking about speaking to customers about what they want and then delivering it. And we've had that as a theme on the podcast before.

But often customers don't know what they want and they would know about the prohibitive costs of hardware. And so if you'd gone to a customer and say, hey, would you, can you see yourself using this kind of device? They'd probably said no.

Yeah, but I think that self belief is really important in the early stages.

David Hart
00:15:58

At the time, the digital signage industry was a different type of, it was, it was servicing a different type of customer. So effectively we kind of helped open up a different market.

If you looked at the Gartner reports back then and it was saying, well, you know, what's the potential size of the market?

It was pretty small because they were assuming, I think that people would just, it would just be this group of people that bought these, you know, people like McDonald's who would have vomit proof screens or something. But most of us don't need those. It's fine, we can just use a normal tv.

Dom Hawes
00:16:31

You still had to market and get, or communicate I should say, and launch yourself in a market with some pretty big players and presumably you didn't have enormous resources to do it. Talk to me about how you went about getting awareness.

David Hart
00:16:44

I think there were two key things. One was deliberate and one was accidental. We didn't have enough money, as you say, to do, you know, an advertising campaign.

We'd raised a little bit of money to start with more of a. We did an angel round to start with friends and family. So we definitely couldn't afford to do Google Ad campaigns or anything like that.

So we, what we did is just invested in content and we hired a brilliant person called Beth who just worked for us. She used to work for our agency actually. And then she went freelance and started working for us part time.

And we just said, can you just write three articles? I mean this is going back so things have probably changed, but can you write three articles a week?

But what we, what we wanted to do was not write really about digital signage, but write about the use cases. So they were very long tail and we were finding that people were finding us.

People I mentioned earlier about it was a greenfield sort of bunch of customers. So they weren't necessarily looking for digital signage. And digital signage, especially in the UK wasn't really a thing.

You said digital signage and people thought it was PDF signatures, that sort of thing. And so what they were looking for with more of the use cases like how do I show my tweets as it was on a screen using a Fire TV stick.

And so we just wrote loads of content like that around. You know, we looked at all these use cases and then all the verticals. So we were. Schools were using us churches in America.

Dom Hawes
00:18:07

Wow.

David Hart
00:18:07

Big, big users offices. And so we might do something like how do I show students work paintings on a screen using an Amazon Fire TV streak or something like that.

And in schools.

Dom Hawes
00:18:18

Yeah, yeah.

David Hart
00:18:18

And then we just write a whole, whole load of stuff like that and that. It was early days, nothing really happened, but, you know, we just kept going.

And I would credit a lot of our growth was down to content that we did really. We did. We did videos as well. We kind of did again really lo fi videos of how to set things up. And so, yeah, that worked really well for us.

So that was the kind of deliberate thing, the axle dental thing, which was enormous was I mentioned earlier that nobody else was doing digital signage on an Amazon TV stick. And in order to use our service, you had to download the app from the App Store, from the Amazon App Store or the Google one for their Chromecast.

And because we were the only ones doing it and there were loads of people that were searching for this stuff that was kind of wasn't necessarily your traditional digital signage. We were. We were easily found. So we were only people there.

So if you went onto Amazon and said digital signage or anything related to digital signage, we were the only ones that were coming up. So people. We were just getting discovered for free. And yeah, people were just downloading it because it was. Because we were doing a free trial.

There was just no barrier to entry. They could just download it, play around with it. They already had the. The stick probably for some other reason. So, yeah, that was.

I think that was massively influential for us in the early days. We hadn't planned it, but it was.

Dom Hawes
00:19:48

That's great.

David Hart
00:19:49

But I think it's something that I say to people that I work with now is you need to be discoverable, you need to be where people are looking. And it might not be necessarily the obvious places. It might not be that they're saying, hey, I'm going to go on to digital signage.

I don't know like a new site about digital signage because I haven't even considered. That's what I wanted. I just wanted to. I had this particular use case.

Dom Hawes
00:20:11

You had that advantage for a year, maybe.

David Hart
00:20:14

Yeah.

Dom Hawes
00:20:15

You said that other people then caught up pretty quickly. So your point of differentiation was technology based. Other people were able to catch up. How did you handle things then?

Like, so a year, maybe a year and a half in when there's more competition.

David Hart
00:20:28

Because we'd already established ourselves, we had, you know, content was still really, really important.

And there was a direct correlation between traffic and trialists, which again, as I've learned since, especially when you're doing enterprise, the two might not be as closely matched. But yeah, if we could drive more traffic, we could drive more trials and people at scale behave in a predictable way.

So we could be pretty clear that the more traffic we drove, the more trials we'd have and the more conversions we'd have. We'd also raised money at that point so we could start doing advertising. We were working really hard on the product.

In fact, we decided about two years in to completely rebuild the product because we realized, I think our investors said if you want to get to $100 million, you're going to struggle if your average annual contract value is $600 kind of thing, you're going to have to, you know, you're going to have to get tens of thousands of customers on board. So we realized that we needed to start appealing to more enterprise customers.

And we also realized that the product that we'd built, which was really just an mvp, we were just trying to solve a problem, actually wasn't. It didn't really work for enterprises who had more kind of security requirements, more complex workflow and permissions and things like that.

So we rebuilt from scratch, which was great in some ways, it was great. In other ways it wasn't because it then took us another year or so before we launched the new product.

So we had a load of customers, we'd spent a load of money rebuilding this thing and not a single customer had used it. But it meant that we, you know, all the kind of product mistakes or things that we'd learned we could then put into the new product.

So it was, it was quite a bold thing to do, but it turned out to be the right thing to do. So when that was launched, the product was sort of technically had kind of outrun some of the competition at that point.

But I also think, you know, we'd built a bit of a brand. We've got a reputation, we've got a great portfolio of customers. We had some great case studies.

Once you get out of that kind of early bit and you can start shouting about all the great things that you've done.

Dom Hawes
00:22:41

I mean I always say momentum is really important and certainly when I was building this business, nothing like the scale you guys have built. But that momentum sort of feeds, it ends up feeding itself, I think.

And one of the challenges I've had in the market for the last two or three years, when confidence gets sucked out of a market, everyone's momentum kind of slows down and that then slows. That in itself kind of compounds the slowing down. So I'm hoping that 2025 we might see some green shoots again.

David Hart
00:23:11

Yeah.

Dom Hawes
00:23:12

Let's think about marketers now and like why people might productize and why marketers and agency people in particular might be ideal. What, what advantages do you think people who work in marketing agencies specifically are well suited to SaaS?

David Hart
00:23:29

This isn't really marketers so much, but agency owners or anyone who started their own business. You have that entrepreneurial DNA. You've kind of built your business, you've probably built it without any financial help.

And I do think sometimes we underestimate how much that puts us in a relatively small club.

People who've built their business from nothing on their own, you know, not everyone does it and you kind of just take it for granted because everybody else around you has done it. But actually that puts you in a, you know, quite a unique, unique position.

So I think having that kind of, that grit and those battle scars I think are really important. You're also probably capital efficient by nature because you've had to be, especially if you haven't raised money.

You've had to kind of really make sure that you've used that money wisely and investors increasingly are appreciating that it's a double edged sword as well because I think it can have a negative impact when you're responsible for a fast growth VC backed technology company. But nevertheless it's still a good thing to have.

You probably understand the vertical maybe probably better even than people who work in the vertical because you might have, you know, I'm working with a company at the moment called Pixelate and they have a product, they're an agency, but they just work for membership organizations.

So they know everything that every membership organization probably better than people who work in Membership organizations themselves because they're seeing tens and or hundreds of organizations. So you've got that kind of insight that I think gives you a massive advantage depending on type of agency you are.

But you might have a team in a box already. So like us, we were mucking around with ideas in our downtime, which I think is fine.

In the early stages, you have to kind of move it from just stuff in the downtime to making it more specific or more, you know, putting more effort into it than just when you haven't got other stuff to do for it to really fly.

But early stages, when you're just, just experimenting and doing MVPs, imagine if you, as I say, if you just came out of a bank as a career in a banker and you write, I'm going to. I've got this great idea for a SaaS startup.

You wouldn't, you, you couldn't just kind of do things in your downtime unless you were personally a coder or you would probably have to go and hire a team or outsource it or whatever, like. But you've just got that thing kind of there.

So I think, yeah, the kind of the entrepreneurial grit and, and just having that knowledge, I think gives you a massive advantage over others.

Dom Hawes
00:25:56

We're taught to experiment, right. You take an idea, you test it, you validate it, and if it works, you scale it.

And we talked already a little bit about ScreenCloud was your 15th or 16th product, which implies you did a lot of experimentation before deciding that's the one.

David Hart
00:26:13

Marketers generally, they're paid to be creative and to come up with ideas and to try and solve gnarly problems.

And also, I think, think also bringing their A game to lots of things at the same time, I think, which again, lends itself to that idea of coming up with ideas for products or trying to identify problems that you could solve in a different way. So, yeah, for sure.

I think if it does put you in a good position, I think I'm not disparaging of other professions, but I think you are kind of, you know, you're exposed to that kind of thing on a daily basis. Like, we've got this product, we've got this product that we need to sell and we need to have an innovative way to sell it.

So you're constantly being ambitious. Thing like that. Yeah.

Dom Hawes
00:26:58

And there's a good history of agencies creating pretty famous products.

David Hart
00:27:02

Yeah.

Dom Hawes
00:27:03

In the book, you name a few.

David Hart
00:27:04

The ones that people always bring to mind are people like 37signals and Basecamp. So they had an agency for a bit. They had this product project management tool and decided to productize it and then thought they'd give it a go.

They'd say, well, let's see if we can get $5,000 of monthly recurring revenue by the end of the year. I think they hit it within two or three months and eventually thought, well, let's do this and stop doing the agency.

Mailchimp is another good example. You know, he had the.

Ben Chestnut had an agency that was building kind of ads, you know, small digital ads and things like that, and running email campaigns for their clients. And then he automated it. It realized that he could turn it into a product.

Dom Hawes
00:27:47

Yeah.

David Hart
00:27:47

But then, you know, closer to home, I mentioned Pixelate earlier. They were a digital agency, 20 years old.

They productized the sort of functionality that they built for membership organizations and sassified it, and it's called Ready Membership, and that's its own standalone SaaS product now, still with a lot of professional services on top of it.

Dom Hawes
00:28:09

Okay.

David Hart
00:28:10

Another company I'm working with called Studio Graphene, which is an agency, they've just launched an IoT food monitoring SaaS service, which is really early stage. So Pixelate are quite a long way down the line.

They're doing a significant amount of revenue from Ready Membership Telson, which is the product that Studio Graphene has spun out. When I met them, they were at the idea stage and now it's revenue generating. But it's still early days and you.

Dom Hawes
00:28:38

Seeing still then people, they're building a product and they're focusing on that, but wrapping service around it.

David Hart
00:28:43

Well, in Pixelate's case, it's very much an enterprise sale and you can't really. They haven't managed to disentangle it yet with Telson and Studio Graphene, it's a completely different product. So it's standalone.

Dom Hawes
00:28:55

Okay.

David Hart
00:28:56

There aren't really professional services. There's a little bit, but it's not to do with the agency thinking about.

Dom Hawes
00:29:02

Setting up or productizing something you do. Or let's just say if you're thinking about starting a SaaS company, what are some of the early steps you'd advise people to take?

David Hart
00:29:11

I think we spend a lot of time thinking about the answer and not really much time thinking about the question. And what I mean by that is we're taught to kind of like, the question's easy, just what's creative? Is the answer.

But actually if you put more effort into what the question is, so what are you really trying to solve for the customer? The ultimate End user, what ultimately is their problem.

And actually, if you can spend more time thinking about that than saying, hey, I've got a great idea how we can use this technology. By the way, we didn't do any of this. So this is what I've learned post.

But you think about, we used to be quite happy with the way that you took a taxi. Uber came along and completely changed the way we thought about riding taxis.

And what they did was effectively said, well, look, I think, you know, what are the steps currently for taking a taxi? You have to go and find the taxi.

You have to tell the, get in, tell the guy where you're going, get to the other end, make sure you're there, pay the amount of money, work out what the tip is, take the receipt, claim it back, all that kind of stuff. And Uber just said, actually, all you have to do is say where you want to go and then, then pay the tip.

So they've taken out what, six or seven steps within that. So I think that's where the innovation comes from.

It's like thinking about that, really understanding the question and then trying to figure out how can you use technology to remove some of those steps. The other thing for me is, which again, we never did, is it's really important.

There's two ways I think, that I talk about in my book actually, of validating an idea. One is like internal validation, which you can do for free really quickly.

And you know, really, that's one of the, one of the ways around that I think is really asking yourself the question for B2B SaaS, unless it makes people money, saves people money or keeps them compliant, anything else is a nice to have and you're never going to scale that.

So you have to be brutally honest with yourself when you're, when you're thinking about the things that you want to produce genuinely, is it going to make someone money, save them money, or keep them compliant? If it's. Well, you know, doesn't quite really do any of those things is probably a nice to have. So that would be the first thing.

And the second thing is, does it keep the CEO awake at night? Is the problem that you're trying to solve or unlock keeping the CEO awake at night?

And with ScreenCloud, we didn't realize this, but we thought the problem was that there were blank screens. People had screens, they're either blank or they were showing Sky News on mute. That's what we thought was the problem.

But actually the reason why we started ScreenCloud is because I wanted to put KPIs.

We had an agency, I wanted to put the KPIs on a screen in our office and we couldn't work out how to do it other than having a Mac mini gaffer take to the back of the screen.

And the reason I wanted to do that is because I perceived that when we were doing our kind of monthly updates, the team, that they weren't really engaged.

And I remember at Reading Room, actually, we used to have a flip chart where we used to write how much money we generated that month and how close we were to our targets. And for me, it was a real kind of compelling way to get everybody behind what you were trying to do as a company.

Like, hey, look, we're 20,000 quid off hitting our targets this month. What can we do? What can we invoice? What product can we finish? What project can we finish?

So I wanted to kind of install some of that because I was worried that people weren't caring and it was having an impact on our revenue. So the thing that was keeping me awake at night as the MD of our agency was we're not hitting our revenue targets and nobody seems to care.

ScreenCloud of did. It was unlock, to my, to my mind, unlock some of that opportunity.

So it's, it's, it wasn't that I was looking at screens and going, I'm really annoyed that they're blank. That's. That would be a nice to have.

But I was looking at those screens and saying, I think they can actually change something within our agency and that's that. And it can make us more money effectively. So it's unlocking a particular problem. So I think that's really, really important.

And you've got to be brutally, brutally honest with yourself. If it doesn't do either of those things, it's probably a fantasy. So. And then the second part of product validation is actually talking to customers.

It really is about. I mean, I recommend a great book called the Mum Test here, which I don't know if you've heard of it, but it's a re.

The thing that you can't do is go out and go, hey, I've got an idea for a business and show them a kind of wireframe because they're just going to tell you, yeah, that's lovely. I like it, really like it, what you really need to do. And again, working with a few people recently about this.

So I was working with one company, they're an agency, like a data company, and they built a product which was a benchmarking tool.

Dom Hawes
00:33:38

Okay.

David Hart
00:33:39

And I was like, and. But nobody, none of their customers were really using it.

They're giving it away for free for a year, hoping that then they could turn around and say, hey, do you want to use it?

Dom Hawes
00:33:46

Yeah.

David Hart
00:33:47

And they were like, yeah, no, they're just not really engaged. And I was like, have you asked them the question, do you benchmark your data against your competition? They were like, no. I was like, why?

And really it was because they didn't want to hear no, they don't want to hear no.

I was like, you've got to come up, We've got to come up now with two or three questions that absolutely terrify you because otherwise you won't get the information that you need. And also those kind of questions might reveal something that you hadn't really understood before.

So it's really, you've got this validation, you've got some of it in your own head that you can just do. And then you've got this free resource, which is customers. But weirdly, we don't ask customers.

We just hope, fingers crossed, that we've kind of figured something out and they're going to love it. But actually the customers are out there and by and large, they'll happily talk to you for free.

And if you do it in the right way, you can get some real massive insights.

Dom Hawes
00:34:40

It is a special skill, though, speaking to customers, isn't it?

Because, I mean, I think certainly my experience of doing it as, not as a startup, but if you like, as an incumbent and asking about service standards and service improvement is what they tell you they want isn't always what they actually want. Want.

David Hart
00:34:56

Yeah.

Dom Hawes
00:34:57

So I think you have to focus in on their problems rather than offering them a solution and say, would you buy this?

David Hart
00:35:03

I mean, I was, I was doing something with a customer recently and their, their branding agency had come in and said, right, this is. We've got this great idea is. And they'd come up with this kind of concept. And I was like, have we talked to customers about this concept?

I couldn't see how that would relate to customers particularly. But I was. So I said, right, let's go and have these conversations.

And I was pushing the kind of conversations I was having was, what was it like before you use this product?

Dom Hawes
00:35:27

Okay.

David Hart
00:35:27

And they were like, wow, you know, it took me so much time to collate data. And I was like, well, wow, wow, that. Okay, what was the, what are the impact of that? Well, I didn't have any time to be really strategic.

I said, okay, I kept pushing, kept pushing, and eventually he said I missed out on a promotion. And I was like, oh, yeah, okay, well, tell me about that. So. And then he starts saying, well, yeah, they didn't think I was strategic.

They thought I was a kind of data monkey, but I am strategic. I just didn't have time. And so you kind of think, okay, that's a massive insight there. So what can we do?

Maybe the messaging is around how we make you a hero amongst your bosses and how we make it really easy for you to produce really insightful research documentation or something like that. I wouldn't have got there if I'd said, hey, I've got this idea for a product that allows you to do, I don't know, nice research papers.

He wouldn't have told me anything that was useful. But it's just, yeah, getting, pushing, pushing and pushing without leading. That's. I think that's the challenge.

Don't tell them, what do you think of this idea? Because they're going to tell you, they're going to say it's nice, which is just because they want to get off the call, you know.

And also, people don't like to hurt other people's feelings.

Dom Hawes
00:36:38

So this reminds me, actually fun enough sort of back where we started. But these are some of the conversations back in the incubator days that I used to have with startup founders.

And one of them is like, being really clear on who the customer is, like who's actually paying. And you're mentioning of Uber makes me think of that.

So I was involved with a small group of people in about 2013, 2014, and we were trying to solve the wrong problem.

So we were looking at taxis, we were looking at minicabs and thinking the problem with them is they're always half of their time they spend being empty. So can we create a piece of technology that allows them to get paid in both directions? So Uber solved that problem.

Yeah, but they solved a bigger problem because the customer isn't the minicap company. The customer is the person taking the car. Car. So their customer was more powerful than ours and they were solving a bigger problem.

So I think part of the challenge when you're thinking about doing something new is being really clear on who the customer is. Because if you're like. In our case, we were looking at drivers and minicab companies thinking that they're the ones that have the power.

Actually, it's customers that have the power. They pay the bills.

David Hart
00:37:36

We were exactly the same. We built one product, it was called Get Dash, it took us a year.

We had this idea, or rather Luke, our CTO had this idea and he just went off and built it and we didn't talk to a single customer. And then when he did the ta da, it was like, you know, it wasn't different to what we thought as co founders, what it was going to be.

And then we'd all fallen out in fluff with it because it would have taken so long and never saw the light of day, really. We spent over a year and God knows how many thousands of pounds.

But yeah, if we'd involved customers and actually had conversations early on, it's still. It's weird. I don't know why, but as agency owners, we probably, and marketing departments as well, we probably advocate customer research.

That's part of the thing that we do. But when it comes to our own thing, we're like, nah, I'm not gonna do that. We know the answer.

Dom Hawes
00:38:21

We know the answer.

David Hart
00:38:22

Yeah.

Dom Hawes
00:38:23

Rule number one, you are not the customer. Right.

David Hart
00:38:25

Quite often people say to me, you know, because of my background, they'll say, oh, I've got this great idea for a SaaS business. Can I show it to you and you can tell me what you think.

And I kind of say, yeah, you can do, but it's kind of irrelevant what I think because I'm not your customer.

Like, I could, you know, I could blow smoke up your ass if you want me to, but actually, you'd be much better off talking to an actual customer than me. Me than me. There's only a limited amount of value that I can add.

Dom Hawes
00:38:49

Huge value.

David Hart
00:38:50

Well, I can some areas, but I could add value in terms of how you might go about launching the product, but I can't really necessarily tell you whether the product is valid or has legs. You have to talk to an actual customer.

Dom Hawes
00:39:03

And so we're talking mainly here about, I mean, I mentioned earlier digital products, but specifically we're talking about SaaS.

And I noticed recently Salesforce has announced they're going to change or they're thinking of changing their billing model, I think away from a per seat to a usage model. A bit like Azure or aws.

Do you think that that puts in doubt the future sustainability of the whole SaaS model, or do you think that, I mean, is this was SaaS a moment in time or do you think that there's still legs for that for that model?

David Hart
00:39:36

Again, I think it all comes down to the customer, ultimately. So, I mean, do you remember when we used to. To have mobile phones and you used to have to pay per text and per. Which is kind of annoying, right?

Dom Hawes
00:39:46

It was really annoying.

David Hart
00:39:47

Aren't we happier now that we have? And the reason is because you have a kind of I know how much it's going to cost me each month. And so for some customers that's really important.

And for some customers the usage element is actually scary because it might be something they've got no concept of. So we within ScreenCloud one of the things that we did was a tool that allowed you to live stream.

And for us the cost of that was directly related to, you know, how many people were watching it and how long the stream was and all that kind of stuff. And so we were like struggling with how are we going to do this? And we thought about a kind of usage model.

But we thought actually for customers it's really complicated. They just want to say it's X dollars per screen per month because then they can budget for it. If they're kind of saying, well it's this.

But if you have, if suddenly one month your CEO does a live chat and loads of people log in, then that's going to cost. And they were like, well we've got no way of knowing what this is going to cost us in that case. And so I think there's room for both really.

I mean it makes sense I think especially where it's very direct, the value you're getting as a customer. So for example, we used to use a tool in our billing which would do automated dunning, credit card checks.

This is again when we were a product led growth, self serve type product. And the way they build was the amount of money that we save you from people churning and not being able to. We'll charge you a percentage of that.

So for me that was easy. That was a no brainer. It's like, okay, so I'm gonna lose less money and I'm gonna give you some of that. That's that that makes.

That doesn't kill my budget if something sort of takes off like actually weirdly aws. Like we got stung a few times with aws. Yeah, but obviously you accept that.

But it's just a lot of customers aren't necessarily technical or don't necessarily understand the usage basis. So it might not work for them but I think with all these things it's going to evolve.

And yeah, the other model that I've sort of seen is 37 signals have brought out this thing called once. Did you see that?

Dom Hawes
00:41:53

Okay, no, I haven't seen that. What's that?

David Hart
00:41:54

They've repackaged, I think it was Campfire, which is a product they had a SaaS product had a while ago and said, look, instead of subscribing to it, you just buy it. Okay, 250 bucks. And it's a sort of, it's like, they say it's a bit like Slack.

So instead of paying $20 a month per person or whatever it is for Slack, which if you're a huge organization that can ramp up, you can just buy this bit of software once and you host it, you install it, you run it, but it does all the functionality that's. It's a sugar.

Dom Hawes
00:42:24

CRM did that as well. Yeah, they've got a. Yeah.

David Hart
00:42:27

And so you say, okay, well that's an interesting model as well. I mean it makes sense. It only makes sense if you're a company that feels confident enough to kind of host your own SaaS product.

And also it has to make sense commercially for the people building the software. And I think for them, obviously they've got a big reach so they can sell lots of these things.

And I think a bit like the old days when Adobe updated Photoshop, you'd go and buy another cd. I think it's a bit like that. Like they might say, well, if you want to upgrade to the next version, you have to pay again.

But again, it might work well for some products and not well for others. So I think we probably will see emerging models like that. But I don't think it kills.

Dom Hawes
00:43:07

It's not going to kill it, is it?

I mean, I think in Salesforce's case, maybe their per seat license, certainly enterprise license, unless you're really using all the functionality, is pretty chunky these days. And maybe this is a reaction to allow to try and grow the audience because they are, are de facto the gorilla in the marketplace.

So how are they going to grow now? Yeah, they have to change something. And P price, being One of the four Ps is an obvious place to look at.

Can we change the way people perceive about, you know, perceive price?

David Hart
00:43:35

And the other thing to think as well is that, you know, the, the outcomes are shared in as much as if you have low use, even if you're playing per seat, if you've got low usage, if no one's actually using your product, they're going to churn anyway. So it's in your interest as a SaaS company to ensure that people are using the product all the time or as much as possible.

So again, I think it just comes down to what is most valuable to the customer and makes most sense to them and doesn't kind of put them in a situation where they suddenly end up with a massive bill they weren't expecting.

Dom Hawes
00:44:06

Right, let's talk about your book. What made you want to write a book that's a labor of love?

David Hart
00:44:10

Yeah, yeah, it's interesting, actually. At ScreenCloud we did. Me and my co founder started writing.

We wanted to create a new market category and thought we should write a book, which is kind of what the guys at Drift did.

Dom Hawes
00:44:21

Okay.

David Hart
00:44:21

They wrote a book called Convers Marketing and that created a whole new category. And we're like, let's do that for ScreenCloud.

So we kind of signed up for a course and it was like an online course and sort of learned about how to structure a book. And as we were writing it, I was like, this is tough. This is not.

You know, it's an interesting idea, but I'm not sure what we're writing is going to be that interesting. And so we never actually finished it.

But in my head I was thinking, God, if I was doing this, but if I was doing it, about that journey from agency to SaaS, I've got so much to say about that. And so, yeah, I guess that was a kernel of it. And so I just. Yeah, just started writing it.

And in my head I was thinking if I'd like to write all the things that I wished I'd known when we started ScreenCloud and avoid some of the crazy mistakes that we made and, you know, the assumptions that we'd made and the things that I just wasn't aware of. You know, I didn't know anything about raising capital. I didn't really know anything about SaaS metrics and the importance of that.

I didn't really know how to validate an idea.

I didn't understand how to structure a SaaS sales team, how to kind of make sure that you're tracking things in the way that kind of can allow you to improve results and things like that. So that was really the kernel of it.

Dom Hawes
00:45:37

It's good work. It was a good read, certainly.

And one of the things I really enjoyed on LinkedIn is seeing people who are talking about the book, like random people I know have found their way to the book and they're talking about it online. It's kind of cool.

David Hart
00:45:49

I've had a few instances where I met someone, someone a couple of weeks ago or maybe a month ago who'd read the book and I didn't know him. I'd never Met him before and he said, I've read your book, and then started quoting anecdotes from the book to me.

Dom Hawes
00:45:59

Really?

David Hart
00:46:00

And then this morning I woke up and had a really nice LinkedIn message from someone saying, hey, I've read your book. And you know, everything. You're every. I can't remember what you said. Every paragraph. I'm living exactly what you're talking about.

Dom Hawes
00:46:12

Oh, really?

David Hart
00:46:13

And those sorts of things, that just makes sense.

Dom Hawes
00:46:15

And he wants to find a way out.

David Hart
00:46:17

Yeah, exactly. And I have a massive fondness for agency owners because I was one.

And also kind of think, oh my God, you know, the difference between I don't want to slag off agencies and I know you don't want to talk about agencies, but the difference in terms of financial value that you're creating as a consultancy and it's a multiple of EBITDA. Compare that to multiples of ARR when you're valuing a SaaS.

And it's just like you could, you know, you could make something so much more significant.

Dom Hawes
00:46:45

Yeah. A totally different game. So if anyone does want, if you're listening in an agency and you do want to sell it, come speak to me because you can.

I come by your agency and you can go on and build a, build a product with David.

David Hart
00:46:55

David. Yeah, yeah. It's just kind of like. It's perfect. Joined up. We should start a business. We should do that. SaaS business.

Dom Hawes
00:47:01

Look, if people want to get in touch with you now, if they want to get your help or whatever. How do they do that?

David Hart
00:47:06

Either go to my website, David Hart IO, it's got everything on there. I write a weekly newsletter as well. Sign up to that if you don't want to shell out for a book just yet or buy the book and then. Yeah, if you want to.

You know, I work with people in different ways. I'm a non exec director for about seven or eight.

Dom Hawes
00:47:24

Okay.

David Hart
00:47:25

But obviously I probably can't do that anymore. There's a limit to how much you can do of that. But I, I kind of. Yeah, I. There's not really a one size fits all.

So I'm kind of doing a bit of advisory work, like, you know, coaching type work, as well as kind of running workshops and yeah, it just really depends really how. How people want to work with me.

Dom Hawes
00:47:44

And now we're going to lunch. See ya. Big thanks to DAV for coming to the studio to see us. There are five copies of his book that I have on my desk waiting to give away.

Nothing fancy. Today. No landing pages, no data capture, nothing like that.

All you need to do is email me at unicorny@selbeyanderson.com and tell me why you think you should have a copy of the book. I'm going to choose the five best answers and I will send one to you if you are one of the best.

Thank you very much for your time and we will see you next week on the Unicorn Marketing Show.