Latest / The Official SaaStr Podcast: SaaS | Founders | Investors / 5 Interesting Learnings from Braze at $500,000,000 in ARR

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5 Interesting Learnings from Braze at $500,000,000 in ARR · The Official SaaStr Podcast: SaaS | Founders | Investors

• 0:00
  SPEAKER_00: My name is Bill Magnuson.
• 0:01
  SPEAKER_00: I am the co-founder and CEO at Braze.
• 0:05
  SPEAKER_00: We were founded in 2011 and actually I was the CTO until 2017 and so have a lot to kind of talk about in our history today.
• 0:13
  SPEAKER_00: It's obviously an important moment in time across the whole markets.
• 0:16
  SPEAKER_00: We heard from Jason earlier a lot of the pressures that you know a lot that this entire community is under from a venture perspective, from an overall market perspective, but what I want to really focus on today is that you know when change is happening even if
• 0:30
  SPEAKER_00: You know, surface level, we look at it, it feels like negative change.
• 0:33
  SPEAKER_00: There's always opportunity in that.
• 0:34
  SPEAKER_00: But parsing through the opportunity, trying to find the parts of it that are enduring, finding the parts that are not the kind of surface level vanity metrics that a lot of the hype tends to focus on, but the things that are actually going to have staying power, which often take a while to percolate and mature and really settle in,
• 0:50
  SPEAKER_00: Those are the places where you can really build enduring differentiation and build enduring businesses.
• 0:56
  SPEAKER_00: I'm going to talk through the story of Braze and how we really process that from a market perspective, introduce a few mental models for people to use, and I hope you find this helpful along the way.
• 1:07
  SPEAKER_00: So, you know, of course, always start this out with the From Humble Beginnings photo.
• 1:12
  SPEAKER_00: This is actually me and my co-founder, John Hyman, back in 2011.
• 1:16
  SPEAKER_00: This is at the third ever WeWork in the Meatpacking District in New York.
• 1:20
  SPEAKER_00: And if you look on the ground there, fun fact,
• 1:23
  SPEAKER_00: WeWork has run out of money more than once.
• 1:25
  SPEAKER_00: The first time was actually when they were outfitting that office space and they left us with bare concrete floors in this nice little oven box up on the top floor.
• 1:37
  SPEAKER_00: We started off July 2011.
• 1:39
  SPEAKER_00: We had a huge amount of conviction in mobile.
• 1:42
  SPEAKER_00: As I mentioned, I was the CTO.
• 1:43
  SPEAKER_00: John Hyman is today's CTO.
• 1:46
  SPEAKER_00: Two technical co-founders to start out with, which is a great privilege as you're starting to build a new product.
• 1:51
  SPEAKER_00: And actually, Braze, which is well known for selling to marketers today, actually sold to developers back then because mobile apps at the time didn't have business models.
• 2:01
  SPEAKER_00: They weren't making money.
• 2:02
  SPEAKER_00: And when you don't have a business model,
• 2:04
  SPEAKER_00: You usually don't have marketers.
• 2:05
  SPEAKER_00: And so we were actually building for people that were building apps.
• 2:08
  SPEAKER_00: As developers, it was pretty nice, because as a developer, being able to build something that is used by people that you understand was really amazing.
• 2:17
  SPEAKER_00: And an interesting fact, and we'll kind of dig into this a little bit later,
• 2:21
  SPEAKER_00: Back in 2012 when we launched our beta, we had more developers sign up for the, we were called Appboy at the time, for the Appboy beta than we even have customers today, 12 years later having gone public and now worth billions of dollars.
• 2:37
  SPEAKER_00: Take that away a little bit and really reflect on what that means as you're building your business and the metrics that you focus on.
• 2:43
  SPEAKER_00: We were so excited about that in the early days.
• 2:45
  SPEAKER_00: It felt like there was a gold rush around mobile apps.
• 2:48
  SPEAKER_00: And now here we are, more than a decade later, still have less customers than the number of developer signups we had for our beta.
• 2:55
  SPEAKER_00: And of course, the reason being that that wasn't the right metric to focus on.
• 2:59
  SPEAKER_00: And what we've really built for was the enduring change that happened in the market.
• 3:03
  SPEAKER_00: So, Braze today, I mentioned, you know, founded in 2011.
• 3:06
  SPEAKER_00: We're coming up on our 12-year anniversary this summer.
• 3:09
  SPEAKER_00: We were headquartered in New York City to start with, but London was also our first international office, and today is our second largest office globally.
• 3:17
  SPEAKER_00: I like to say that the center of gravity for Braze exists somewhere over the North Atlantic.
• 3:20
  SPEAKER_00: It is not somewhere over the United States.
• 3:23
  SPEAKER_00: And, you know, we're probably a very global company.
• 3:26
  SPEAKER_00: Today, about 43% of our revenue comes from outside of the United States.
• 3:30
  SPEAKER_00: And an interesting kind of fact about that is that
• 3:34
  SPEAKER_00: I get questions from public market investors about why such a huge mix of ARR revenue as a relatively young company comes from outside of the US.
• 3:43
  SPEAKER_00: I always have to laugh at that because I got the same question we were raised our Series B all the way back in 2014, 2015.
• 3:50
  SPEAKER_00: The answer, of course, was that the app stores were global.
• 3:56
  SPEAKER_00: When we first opened our London office, three of our four largest customers were based out of Oslo, Armenia, and Berlin, even though we had no humans on the ground outside of the United States.
• 4:06
  SPEAKER_00: The opportunity that was presented by these increasingly interconnected markets didn't respect borders, and it created huge amounts of opportunity.
• 4:14
  SPEAKER_00: led to a lot of change.
• 4:15
  SPEAKER_00: And we therefore have then grown globally in order to service a global customer base.
• 4:20
  SPEAKER_00: Today, that customer base, the combined user bases of all of our customers are almost 5 billion monthly active users.
• 4:27
  SPEAKER_00: We sent over 2 trillion messages last year.
• 4:30
  SPEAKER_00: We processed over 11 trillion data points in order to understand when to send those messages, where to deliver them, what to say.
• 4:40
  SPEAKER_00: Help all of these brands that we work with manage their customer relationships.
• 4:44
  SPEAKER_00: Really work through the foundation of what creates an enduring and durable business in investing in long-term connection, retention, and doing it through high-quality engagement.
• 4:57
  SPEAKER_00: And so, of course, what we want to talk about today is finding opportunities through change.
• 5:03
  SPEAKER_00: And there's a few different ways to think about change.
• 5:06
  SPEAKER_00: There's the pace of change.
• 5:07
  SPEAKER_00: There's different cross-currents in it.
• 5:09
  SPEAKER_00: We kind of move through change in sequences.
• 5:12
  SPEAKER_00: And I think another really important part of change is that
• 5:17
  SPEAKER_00: We also need to look at the fact that even change we might perceive as negative still creates opportunities.
• 5:24
  SPEAKER_00: In fact, when I was checking in here earlier today, the person at the checking counter asked me, you know, what's your talk about?
• 5:29
  SPEAKER_00: And I gave a brief abstract to it, and she said, so what's the answer?
• 5:35
  SPEAKER_00: Do you just wait it out?
• 5:38
  SPEAKER_00: And of course not, right?
• 5:40
  SPEAKER_00: The companies that are going to win are the ones that are going to actually predict what the change is leading to and start building for that tomorrow, right now.
• 5:50
  SPEAKER_00: So that when it gets there, you actually have a head start on all the competition and the market arrives and it's waiting for you.
• 5:57
  SPEAKER_00: When the market arrives, you've been waiting for it.
• 6:00
  SPEAKER_00: In fact, when I look at the purpose of venture capital, it's not to burn a dollar five in order to grow a dollar of revenue.
• 6:06
  SPEAKER_00: It's to give you that opportunity to already be building for the market while it is still developing.
• 6:13
  SPEAKER_00: When we were building Appoy, we actually had an interesting vertical focus in the sense that from 2011 to 2015, the only part of the mobile market that was making money was in mobile gaming.
• 6:27
  SPEAKER_00: But what we saw in mobile games at the time were a bunch of, you know, apps that were tricking children into buying fish food by clicking on the in-app purchase button a bunch of times or just like milking their whales and trying to move them from one title to the next.
• 6:39
  SPEAKER_00: These weren't sustainable businesses.
• 6:42
  SPEAKER_00: But we believed that actually people would move their lives, you know, the products and services that they were consuming, the habits that they had, into mobile.
• 6:50
  SPEAKER_00: And so, Apple in the early days kind of went after the Nash equilibrium in the market.
• 6:54
  SPEAKER_00: We were like, hey, why don't we chase after all the other verticals while all of our future competitors are focused on gaming?
• 7:03
  SPEAKER_00: And then as that market grows up, which we believed would eventually be much larger than just gaming was, we'd be ready for it.
• 7:11
  SPEAKER_00: And we would have a platform that was already built to be more versatile and to be more
• 7:16
  SPEAKER_00: and a vertically diversified.
• 7:18
  SPEAKER_00: And of course, that took more time, but it's exactly what happened.
• 7:22
  SPEAKER_00: And so when you look at Braze today, we are a super diversified customer base.
• 7:27
  SPEAKER_00: Our largest vertical contributes the kind of low 20% of our revenue.
• 7:32
  SPEAKER_00: It's e-comm, which is pretty common for a marketing company.
• 7:35
  SPEAKER_00: But if you look right down the list, you've got media and streaming, you've got financial services, you've got health and wellness, you've got QSR and delivery and on-demand, a really diversified customer base.
• 7:46
  SPEAKER_00: And it's because in the early days, we didn't chase after the same ball everyone else was.
• 7:51
  SPEAKER_00: We took a step back and we said, what's really changing in the market and how is that going to create a more broad opportunity?
• 7:57
  SPEAKER_00: Now, when we talk about acceleration, we can't also ignore the fact that these cycles are moving faster than they ever have.
• 8:03
  SPEAKER_00: Now, this is a chart originally from The Economist, but augmented a little bit.
• 8:08
  SPEAKER_00: The time until 25% of Americans have adopted these subsequent technologies.
• 8:14
  SPEAKER_00: And, you know, the headline here is that things are speeding up, obviously.
• 8:18
  SPEAKER_00: You know, the amount of time it took for the television, 26 years.
• 8:21
  SPEAKER_00: Smartphones, only three years.
• 8:23
  SPEAKER_00: But there's another layer of change here, which is like, this was the time until a quarter of Americans picked these things up.
• 8:30
  SPEAKER_00: How long until they affected an election?
• 8:32
  SPEAKER_00: How long until someone wrote a PhD thesis on these?
• 8:36
  SPEAKER_00: How long until a new job title was created in order to work on these?
• 8:40
  SPEAKER_00: How long until there was mass adoption, until it went global?
• 8:46
  SPEAKER_00: When we look at smartphones, interestingly enough, it's the most widely deployed technology ever, even more so than clean water and electricity before it.
• 8:55
  SPEAKER_00: That level of penetration had never been seen before.
• 8:58
  SPEAKER_00: And that's why these markets that are addressable through mobile are so large.
• 9:03
  SPEAKER_00: They're so global.
• 9:04
  SPEAKER_00: They allow such rapid adoption.
• 9:06
  SPEAKER_00: But of course, the flip side is that we still get things in the post that we need to read and reply to.
• 9:12
  SPEAKER_00: The BBC is still broadcasting shortwave radio all these years later.
• 9:16
  SPEAKER_00: There are things that are enduring.
• 9:18
  SPEAKER_00: Just a couple weeks ago in the United States, the first NBA team tried to cut the cord, if you will, and their regional sports broadcaster went bankrupt and they tried to go direct-to-consumer over streaming, and that company in bankruptcy sued them and enforced their contract and disallowed them from being able to go straight to streaming, so they're still on the local cable broadcast.
• 9:39
  SPEAKER_00: There are aspects of change that actually hold us back, that are enduring, where skill sets need to evolve, where regulatory systems need to evolve.
• 9:47
  SPEAKER_00: And there are other places where this speeds up.
• 9:51
  SPEAKER_00: Microsoft bought and divested Nokia in just three years.
• 9:54
  SPEAKER_00: The time from Uber launching to the New York City taxi medallion prices crashing was substantially faster than the multiple decades that it took for Kodak to slowly die.
• 10:06
  SPEAKER_00: There's a lot of different
• 10:08
  SPEAKER_00: www.braze.com
• 10:35
  SPEAKER_00: you know one is that yes things are changing very quickly but two they interact with a lot of things that change more slowly and so the things that move fast create these new opportunities these new toeholds in the market these new technologies to leverage these new ways of working but we need to make sure that we're pacing ourselves correctly and that if we're trying to build a generational business that we know what's still going to be true in five years and ten years and that we're really building to have advantage as those things develop
• 11:04
  SPEAKER_00: Now, of course, the other consequence of these really huge global markets is that the pace at which consumer technologies are being adopted is rapidly advancing as well.
• 11:12
  SPEAKER_00: And here we can see the time to 100 million users, you know, and you've got ChatGPT down there in the bottom right really crushing it recently.
• 11:20
  SPEAKER_00: And, you know, this means that user attention can move really quickly.
• 11:24
  SPEAKER_00: Like, this is another testament to just the size and scale of these global markets.
• 11:28
  SPEAKER_00: But again, we need to look at these and say, what change are these going to drive for humans?
• 11:35
  SPEAKER_00: When we look at the last five years, there's been a lot of places where change has accelerated.
• 11:39
  SPEAKER_00: We looked at COVID, a lot of people's ways of working change, a lot of the ways that we organize our society, that we transact in commerce changed rapidly.
• 11:48
  SPEAKER_00: But a lot of stuff have also kind of turned back to the prior growth line.
• 11:53
  SPEAKER_00: Ecom pulled forward tremendously, and now it's revisited its prior growth path almost exactly.
• 11:59
  SPEAKER_00: When we look at a lot of the patterns of behavior that people have had, it turns out that humans still like each other, right?
• 12:06
  SPEAKER_00: We still like socializing.
• 12:08
  SPEAKER_00: It turns out that a lot of the companies that said they were never coming back into the office are now mandating that people do.
• 12:14
  SPEAKER_00: Right?
• 12:14
  SPEAKER_00: And I kind of look at a lot of those things and, you know, in the early days of COVID, I actually went back and read a lot about the 1918 epidemic, which, you know, impacted global society in a very similar way.
• 12:26
  SPEAKER_00: And the interesting thing about it is that there wasn't actually a lot to read about.
• 12:30
  SPEAKER_00: There's no art, there's no theater, there's no movies that were made about it.
• 12:33
  SPEAKER_00: You don't really learn about it in school.
• 12:35
  SPEAKER_00: And the reason for that was that people kind of moved on afterward, right?
• 12:39
  SPEAKER_00: They actually, even though it was highly disruptive to the entire economy, humans got back to being humans pretty quickly after they forgot about it.
• 12:47
  SPEAKER_00: and of course we're seeing that now too and so I think it's really you know important to keep both of these things in our heads at the same time massive opportunity because of the size of these markets and how fast they can move but at the end of the day you know there's these enduring facts about humans that if we lose sight of those we lose the ability to build businesses that are enduring
• 13:08
  SPEAKER_00: So, you know, big takeaway here as we're thinking about growing a business and now especially when we need to be so focused on prioritization because of access to capital, you need to reserve your conviction and your focus for change that's going to endure.
• 13:23
  SPEAKER_00: If you're just chasing shiny things around, a new one pops up every six months and you're going to run out of energy, you're going to run out of financing, you're going to exhaust the startup.
• 13:36
  SPEAKER_00: And when you get there, of course everyone else is chasing the same ball around.
• 13:39
  SPEAKER_00: It's like a bunch of eight-year-olds out on the football pitch who are just running after the ball as opposed to actually playing a strategy.
• 13:46
  SPEAKER_00: Don't be that version of a startup.
• 13:49
  SPEAKER_00: So, going back to our story, what was the change that we thought would endure?
• 13:54
  SPEAKER_00: Well, we had this in two stages.
• 13:56
  SPEAKER_00: The first one, that new brands would be born and built to be mobile-first.
• 14:02
  SPEAKER_00: In 2011, obviously people were excited about the iPhone, but the biggest apps in the app store were a flashlight app and a compass app and a game where you could feed fish food to an animated fish, right?
• 14:15
  SPEAKER_00: These were fun and they were exciting, but they weren't building sustainable business models yet.
• 14:21
  SPEAKER_00: And so we believe this to be true in 2011.
• 14:25
  SPEAKER_00: But we didn't really start to get product market fit around real at-scale mobile businesses until around 2014 or 2015.
• 14:32
  SPEAKER_00: It actually took three or four years of quiet building.
• 14:36
  SPEAKER_00: Through that time period, we raised our seed round, our series A, our series B. In each one of those rounds, we only got one term sheet.
• 14:44
  SPEAKER_00: And we actually ran out of money twice and had to float a small loan in order to make payroll.
• 14:52
  SPEAKER_00: We were building for a future that we knew was coming, and that we had conviction was coming, but it really wasn't there yet.
• 14:59
  SPEAKER_00: And now the second part was that the enterprise would be transformed by mobile.
• 15:03
  SPEAKER_00: In that same time period, 2014, 2015, when we started to see this first leg of the stool for product market fit happen with these digital first companies, the mobile natives.
• 15:14
  SPEAKER_00: We called them the mobile titans at the time because they were high scale companies, even though many of them were young and had a small number of people.
• 15:20
  SPEAKER_00: The enterprise, you know, in the early days, they would build mobile apps and we would chase them and we even signed a few exciting enterprise contracts, but they were all in these little innovation teams and, you know, many of them had not really rethought their own business models.
• 15:34
  SPEAKER_00: They were succumbing to the same problem that I've just warned everyone about, which is that the enterprises saw mobile and they saw the excitement and the opportunity, but they didn't really think about what is the enduring change going to be?
• 15:45
  SPEAKER_00: How is my consumer going to behave a couple years from now once they've integrated mobile into their lives?
• 15:51
  SPEAKER_00: How do I need to change the delivery mechanism of my whole company?
• 15:55
  SPEAKER_00: And there's a lot of talk about, do you burn the boats or not?
• 15:58
  SPEAKER_00: How do you do that?
• 15:58
  SPEAKER_00: It's like, the enterprise was so far from burning the boats when it came to mobile in 2015.
• 16:04
  SPEAKER_00: But we knew that they were an important part of our future.
• 16:07
  SPEAKER_00: And so as we built our business, we kept these two stages in mind.
• 16:11
  SPEAKER_00: We knew that the mobile-first companies were going to drive our early growth and that the enterprise would be where we would cement our future.
• 16:19
  SPEAKER_00: But we had to be patient.
• 16:21
  SPEAKER_00: We had to wait for things like org charts to change.
• 16:24
  SPEAKER_00: We had to wait for budgets to show up.
• 16:26
  SPEAKER_00: We had to wait for enterprise thinking to kind of lose its momentum and not be so entrenched.
• 16:33
  SPEAKER_00: Wait for the competitive landscape and a lot of the technology architectures that a lot of these enterprises deploy to really shake itself out.
• 16:39
  SPEAKER_00: But today, I mentioned earlier that the number of customers Braze has today is less than the number of developer signups we had for our first beta.
• 16:48
  SPEAKER_00: A big reason is because we were focused on actually looking at both sides of this business.
• 16:54
  SPEAKER_00: We knew that the enterprise was in our future and so we were building for that even in the early days.
• 16:59
  SPEAKER_00: And another aspect
• 17:03
  SPEAKER_00: of that early conviction and really deciding where we were going to exist in the market is that we believe that because of changing consumer sentiment and because of the way that we would adopt mobile technology that increasing levels of sophistication would continue to be rewarded in customer engagement.
• 17:19
  SPEAKER_00: which meant that you know if you were still just kind of blasting out emails to everyone as people had been doing with the likes of a you know what is now called Salesforce Marketing Cloud that that would eventually just stop working that if you were going to actually engage people through digital messaging through these mediums that you're going to have to you know invest in building up what today we call first party data so you could have a stronger understanding of the customer
• 17:42
  SPEAKER_00: you'd have to integrate into the product experience and not just be kind of coming in over the top as many people's email strategies did that you need to be able to coordinate across different channels you'd have to personalize the content to be more relevant you'd want to analyze the results as they come in in collaboration with the data team now you know when we started the company and you heard it kind of in the early in that early video reel the job titles that we sell to today and the teams that we sell to today actually didn't exist
• 18:12
  SPEAKER_00: And a big part of that is because the kind of practice of customer engagement that we see today where it's data-driven, it's agile, it brings together marketing teams with product teams and data teams, that model of working didn't exist.
• 18:27
  SPEAKER_00: And the marketer today versus 10 years ago has become much more data savvy, they've become much more technical, you can count on them to know basic scripting, many of them are comfortable in HTML and other things.
• 18:39
  SPEAKER_00: None of those things were the case 10 years ago.
• 18:41
  SPEAKER_00: and so we had these evolving skill sets amongst the marketer but more importantly we also had evolving collaborative models the marketer started working with the engineers started working with data scientists they started integrating into broader technical architectures and those were the changes that actually ended up enduring over time and so you know one of the major takeaways here is that when you're trying to figure out what change is going to endure through a market go back to the humans
• 19:07
  SPEAKER_00: Who are the humans that you're selling to?
• 19:10
  SPEAKER_00: How is their job evolving?
• 19:12
  SPEAKER_00: What skill sets are they investing in?
• 19:14
  SPEAKER_00: What does it take for them to get promoted?
• 19:17
  SPEAKER_00: How do you turn your early champions into people that become the future business leaders of tomorrow so that they can spread
• 19:24
  SPEAKER_00: www.BRAZE.com
• 19:47
  SPEAKER_00: and so when you're looking at change you know make sure that you're looking at these things that people invest in that move a little bit more slowly because those are exactly the things that are sticky
• 20:01
  SPEAKER_00: Jason talked earlier about the triple, triple, double, double, double, and actually mentioned Neeraj Agarwal as a person who is kind of famous for coining that.
• 20:09
  SPEAKER_00: Fun fact, Neeraj actually invested in Braze right in the middle of this chart.
• 20:14
  SPEAKER_00: And so that 8x in two years is a...
• 20:17
  SPEAKER_00: you know almost that triple triple and we we actually went through and on some framing here we're triple triple double double double with Neeraj's help actually and you know this was obviously a super exciting period and right after that you know we went from 20 to 200 7x-ing in four years
• 20:33
  SPEAKER_00: But I like to kind of look at these graphs and then also look at what a lot of people were including in their VC decks at the same time.
• 20:40
  SPEAKER_00: So here were global smartphone sales.
• 20:43
  SPEAKER_00: So 2011, we're founded.
• 20:44
  SPEAKER_00: It's a little bit to the left there.
• 20:46
  SPEAKER_00: And obviously, this looks like exponential growth, right?
• 20:49
  SPEAKER_00: It looks like a hockey stick.
• 20:51
  SPEAKER_00: 2 million to 20 million.
• 20:52
  SPEAKER_00: So we go out and we raise that financing round with Neeraj.
• 20:55
  SPEAKER_00: And you look at this chart and you're like, ah, it's slowing a little bit.
• 20:59
  SPEAKER_00: It's not great.
• 21:01
  SPEAKER_00: And then 20 to 200 million, not only does it slow, but it actually flattens out and declines.
• 21:06
  SPEAKER_00: This was a vanity metric for our industry.
• 21:10
  SPEAKER_00: The smartphone sales were obviously that created all this excitement in the early days.
• 21:16
  SPEAKER_00: But what mattered was actually that the install base was growing, right?
• 21:19
  SPEAKER_00: We didn't need people to be buying a new phone every single year or all these new people.
• 21:23
  SPEAKER_00: What happened here is that we interconnected the entire world.
• 21:27
  SPEAKER_00: So even though you look at a chart like this and you're like, ooh, shit, that looks like flatlining and declining growth, right?
• 21:32
  SPEAKER_00: The important aspect of this chart was what it was doing to the install base.
• 21:36
  SPEAKER_00: Let's look at another one.
• 21:37
  SPEAKER_00: I remember this being in all of our fundraising decks as well in the early days.
• 21:42
  SPEAKER_00: These were the number of apps and games in the App Store.
• 21:45
  SPEAKER_00: Growing, you know, meteorically in those early days.
• 21:48
  SPEAKER_00: You know, just blasted right up.
• 21:50
  SPEAKER_00: Again, flatlined, went down.
• 21:51
  SPEAKER_00: But these numbers are in the millions.
• 21:54
  SPEAKER_00: Two million apps and games in the App Store.
• 21:56
  SPEAKER_00: We have less than 2,000 customers, even today.
• 22:00
  SPEAKER_00: Right?
• 22:01
  SPEAKER_00: So this was exciting, but it didn't really matter.
• 22:04
  SPEAKER_00: The fact that there were millions of apps in the App Store, like, pretty irrelevant for a SaaS business that, you know, like I said, even today only has 2,000 customers.
• 22:12
  SPEAKER_00: So what did matter?
• 22:13
  SPEAKER_00: Well, this is the revenue that they were generating.
• 22:16
  SPEAKER_00: The revenue of mobile apps worldwide was growing that whole time.
• 22:20
  SPEAKER_00: It took time for customers to trust enough to put their credit card into a smartphone and for the cell networks to get faster and for the install base to get there and for these mobile apps to actually have business models and be focused on building enduring relationships and recurring revenue.
• 22:37
  SPEAKER_00: And when that happened, that was what really enabled our growth and our ability to go to scale.
• 22:43
  SPEAKER_00: So the tale of this is that there's the numbers, and there's the surface level change, and then there's the enduring change.
• 22:50
  SPEAKER_00: And what this meant here is that people were actually building durable businesses in mobile, and that was actually what we were tied to in terms of our growth.
• 22:59
  SPEAKER_00: And so I'll end this section with this, I think, a quote which gets more mutated almost every time it gets repeated.
• 23:08
  SPEAKER_00: I tried to go back to the original source as far back as I could, all the way back in 1981.
• 23:13
  SPEAKER_00: But I think the interesting takeaway with this is that both of these things are true for the same reason.
• 23:20
  SPEAKER_00: which is that the real enduring change has to interact with systems and humans and budgets and governments and the enterprise and all these things that, yes, they move faster today than they used to, but they're still tied to these truths about humans and organizations and structures and everything else.
• 23:39
  SPEAKER_00: And so the surface level change shows up and it moves super rapidly and it builds a ton of excitement and it's a really awesome thing.
• 23:47
  SPEAKER_00: But the change that endures actually also creates substantially more impact.
• 23:53
  SPEAKER_00: And so that's actually good news in a couple ways.
• 23:55
  SPEAKER_00: But what it requires for each one of you as an entrepreneur is to really be able to take a step back from that hype and make sure that you really understand what part of this change is going to endure.
• 24:05
  SPEAKER_00: If you build for that, that's how you build a generational company.
• 24:09
  SPEAKER_00: All right, so from there, how do we then decide how fast we want to grow?
• 24:14
  SPEAKER_00: And this is particularly important in the current venture environment, as Jason just detailed a lot of.
• 24:20
  SPEAKER_00: Now, my job right before we started Braze back in 2011, I worked at a hedge fund, Bridgewater Associates in Connecticut.
• 24:28
  SPEAKER_00: And during your onboarding, there's a session that you do with one of the chief investment officers, and he goes up on the whiteboard and draws out these three investments here.
• 24:40
  SPEAKER_00: And the question is posed, you know, as an investor, which of these would you rather invest in?
• 24:47
  SPEAKER_00: And, you know, a lot of people look at this and it looks on its face like a question of like, how much volatility can you stomach?
• 24:53
  SPEAKER_00: How patient are you as an investor?
• 24:56
  SPEAKER_00: Right, but it's actually a trick question because the only one of these that actually exists as a hedge fund is letter A. Letter B took too long to get off the ground and it never actually attracted early investment and so that fund actually shut down before it even got to its inflection point.
• 25:13
  SPEAKER_00: and letter C they overheated early on you know they raised a down round on the way down there in the hedge fund world they would have shut down in order to capture their performance fee and they wouldn't started a new hedge fund under a different name so they could establish a new high watermark right you know whatever whatever the function is they don't actually get out of that trough and never get the opportunity to come back up
• 25:33
  SPEAKER_00: And so, in this case, this is the hedge fund world, but I think it applies just as much to startups, which is that making sure that you're growing at the right speed along the way is super important because it's what gets that flywheel running.
• 25:46
  SPEAKER_00: It's what builds the momentum systematically over time with your teams and the conviction in the markets and your partners and your investors and being able to raise that fundraising.
• 25:57
  SPEAKER_00: So, okay, great.
• 26:00
  SPEAKER_00: How do we really think about this though?
• 26:02
  SPEAKER_00: So, I like this idea of, so I kind of worked this out and actually, interestingly enough, this is an adapted slide from a presentation that I gave to my company all the way back in 2014.
• 26:16
  SPEAKER_00: When we were really struggling to see that early product market fit, I mentioned that waiting for mobile-first companies to really come to scale took a long time.
• 26:27
  SPEAKER_00: And that's a little nerve-wracking.
• 26:30
  SPEAKER_00: I had conviction that it was going to come.
• 26:31
  SPEAKER_00: I had the patience.
• 26:32
  SPEAKER_00: But that doesn't mean that everyone shares in your patience at your company.
• 26:35
  SPEAKER_00: It's really stressful building a startup in the early days, especially when you're waiting for product market fit to show up for us.
• 26:43
  SPEAKER_00: We felt conviction that we had the product and the market was still developing.
• 26:47
  SPEAKER_00: And it took time.
• 26:49
  SPEAKER_00: And then we also had competitors at the time that had raised way more money than us.
• 26:53
  SPEAKER_00: They were spending way more money than us.
• 26:55
  SPEAKER_00: They were out in the market buying billboards and doing sponsored speaking slots.
• 26:59
  SPEAKER_00: And they thought it was a giant land grab where they were just trying to sign up every logo they could.
• 27:04
  SPEAKER_00: They didn't have any discipline in their sales process.
• 27:06
  SPEAKER_00: They were giving things away for free.
• 27:08
  SPEAKER_00: All these things.
• 27:10
  SPEAKER_00: and you know we were trucking along being patient and one of the ways that I tried to capture this is these supply curves are an idea where if you want to capture a certain amount of business in any given year in your market that curve is relatively static
• 27:26
  SPEAKER_00: And so, yeah, you can spend huge sums of money in order to, you know, move the amount of revenue you're going to get in a given year is that orange dot on the supply curves.
• 27:34
  SPEAKER_00: And so, when your supply curve is relatively inelastic, right, when the market is still immature, when you're selling to growth teams or to data-driven marketers but data-driven marketers, you know, don't exist yet, when you're selling to growth teams and they don't have budgets yet, like, those supply curves are pretty hard to access because you're trying to push into change that's coming but it's not here yet.
• 27:55
  SPEAKER_00: and so yeah you can spend tons of money in order to access a marginally higher market but
• 28:01
  SPEAKER_00: If you're patient and you kind of find that part of the curve that's efficient where you're spending enough but not too much, and then over time the supply curve is going to swing out if you're attached to the right level of change.
• 28:13
  SPEAKER_00: Those mobile apps are going to start to generate more revenues.
• 28:15
  SPEAKER_00: They're going to have budgets.
• 28:16
  SPEAKER_00: The teams that you're selling to are going to start to reform into new org charts because the successful ones are going to get modeled.
• 28:23
  SPEAKER_00: They're going to get written about in TechCrunch or in SaaStr or what have you.
• 28:26
  SPEAKER_00: And other people are going to start to build out similar
• 28:29
  SPEAKER_00: Similar teams.
• 28:30
  SPEAKER_00: CFOs are going to start to assign budgets to those groups.
• 28:33
  SPEAKER_00: People are going to invest in their early skill sets.
• 28:36
  SPEAKER_00: They're going to join things.
• 28:37
  SPEAKER_00: For us, it was their mobile growth communities, or it was going through programs like Reforge in order to educate themselves on how to be an agile marketer.
• 28:44
  SPEAKER_00: These were all the systems that were in place that were processing.
• 28:47
  SPEAKER_00: They were building the market for us.
• 28:49
  SPEAKER_00: They were starting to build that opportunity in a more enduring way.
• 28:53
  SPEAKER_00: And so over the years, the supply curve swings out.
• 28:57
  SPEAKER_00: This is another way of thinking about product market fit as well.
• 29:00
  SPEAKER_00: The better product market fit you have, the flatter this curve is going to be for you.
• 29:05
  SPEAKER_00: The more efficiently you can spend more money in order to access more market.
• 29:12
  SPEAKER_00: And if you spend too much money in the early days when you don't really have that product market fit, you're effectively pushing a rope.
• 29:19
  SPEAKER_00: You can torch a lot of money in the early days trying to push your way up an inelastic supply curve.
• 29:25
  SPEAKER_00: And when you do that, then you end up like letter C here, right?
• 29:29
  SPEAKER_00: You spend a lot in order to push up in the early days, but if the market's not there for you yet, you're going to burn out.
• 29:36
  SPEAKER_00: and so you know keeping this in mind and really understanding like what role do I have to play in the supply curve I think when you're a very large company you can actually go and you can impact these supply curves right you can go and you can give Photoshop away to every high schooler in the nation and you can you know you can do all sorts of stuff where you're gonna play the long game you're gonna develop the market over the course of ten years you're gonna invest in in influencing university education and all those kinds of things and and there's like a lot of amazing ways to actually impact this over time
• 30:05
  SPEAKER_00: but when you're a small startup and you have limited resources a lot of times you have to take things like this as a given and you can go and you can speak at conferences and you can push your message and you should do all those things for sure but know that you know when you're selling into teams and people and and you know these other things that take time to change sometimes you do need to wait and so just make sure you know what's impacting your supply curve and how you can land in the right place on it
• 30:31
  SPEAKER_00: So of course they said, you know, there's the product market fit corollary to this.
• 30:35
  SPEAKER_00: And you need to focus to where your product market fit is strongest, right?
• 30:39
  SPEAKER_00: Try to be in that little, try to be right at that inflection point on these supply curves.
• 30:44
  SPEAKER_00: But don't get stuck.
• 30:45
  SPEAKER_00: You need the supply curve to swing out over time if you're gonna build a business that's larger and larger.
• 30:50
  SPEAKER_00: And so, you know, when we look at this from the Braze days, we obviously had these early adopters, we had the early mobile startups that we were working with, but the area under the curve matters a lot as well.
• 31:02
  SPEAKER_00: www.braze.com
• 31:22
  SPEAKER_00: Trying to stress here is to really think about, you know, how do you transition through those different supply curves?
• 31:29
  SPEAKER_00: How do you look at the change that's enduring because the reason that that part of the market is so much bigger, the reason there's so much under the curve in the early and late majority is because the early and late majority are tied to all those change processes that take longer but also endure more.
• 31:43
  SPEAKER_00: And so, you know, you need to build for the early part of the market.
• 31:46
  SPEAKER_00: That's how you survive.
• 31:47
  SPEAKER_00: It's how you grow in the early days.
• 31:49
  SPEAKER_00: But don't let it distract you from what the unique needs are of the market that kind of waits beyond that.
• 31:57
  SPEAKER_00: And, you know, one example we had actually on this in our early days, I mentioned earlier that, you know, marketers of today are more likely to, you know, know basic scripting and to be able to maybe write SQL or write HTML or what have you.
• 32:10
  SPEAKER_00: And we actually had a product that in the early days assumed that there was strong collaboration with an engineering team because in most mobile startups, the marketing team sat right next to the product team and the engineering team and they were integrated together.
• 32:23
  SPEAKER_00: You look at a lot of the enterprise businesses we sell to today, people that are coming from like a brick-and-mortar legacy, you look at an energy company, you know, utilities, etc.
• 32:31
  SPEAKER_00: They don't even have product teams, right?
• 32:34
  SPEAKER_00: That idea, that concept doesn't exist.
• 32:36
  SPEAKER_00: And when their marketing teams want to build things, they've always gone to the systems integrators, Accenture, Deloitte, or the, you know, WPP, Merkle, the big agencies.
• 32:45
  SPEAKER_00: And that means that, you know, their team structures and the skill sets that they can lay their hands on easily are completely different.
• 32:51
  SPEAKER_00: and so we were building for this more and more sophisticated more technical faster moving startup and losing sight of the fact that actually there were other features that we needed to build that assumed that there was no access to technical resources right and that was actually how we then moved into you know the the early and then eventually the late majority to be able to grab much more of the area under the curve but we had to understand like what else was going on in the market and make sure we didn't get caught in that early stage
• 33:18
  SPEAKER_00: And then the last thing that I want to walk through as it relates to product strategy as well, because of course when we're prioritizing, we're usually building our product in an ecosystem.
• 33:28
  SPEAKER_00: And that ecosystem has a lot of other technical players and it's got, you know, there's inputs, there's outputs, there's places in the value chain where we want to establish our pricing and capture value, etc.
• 33:37
  SPEAKER_00: I mean, I always go back to this quote from Joel Swosky a long time ago, and he's talking about, you know, this idea of commoditizing your inputs.
• 33:49
  SPEAKER_00: So when you look at your whole value chain, what are the complements to your product?
• 33:53
  SPEAKER_00: So for Braze, first party data is one of the strongest examples of this.
• 34:00
  SPEAKER_00: And so for us, in order for us to be able to make rapid decisions, I mentioned that we processed 11 trillion data points last year to send over 2 trillion messages.
• 34:08
  SPEAKER_00: That data is absolutely something where we want the price of the complement, so the price of getting data into Braze, we want it to decrease over time.
• 34:17
  SPEAKER_00: Price has a lot of different meanings, and commoditizing also has different meanings.
• 34:21
  SPEAKER_00: We look at it from a technical perspective.
• 34:23
  SPEAKER_00: Commoditizing something means making the nth thing exactly like the n plus 1th.
• 34:30
  SPEAKER_00: Making it so that you've essentially abstracted away the differences between these.
• 34:35
  SPEAKER_00: So a way to, you know, a lot of times you think about this in terms of dollars and cents, but another way of thinking about this as well is in terms of technical complexity.
• 34:44
  SPEAKER_00: So if you build a good abstraction layer, a good set of APIs, you build a good way for partners to plug in as easily as your customers, as easily as your own software, which is what we've done in our data layer,
• 34:55
  SPEAKER_00: You're effectively commoditizing your inputs of commoditizing those data inputs, and you're enabling there to be competition above that abstraction layer.
• 35:04
  SPEAKER_00: And so, making this a little bit more concrete when we look at Braze, you know, we're a customer engagement platform, so we want to ingest data in order to understand more about customers, and then use that understanding in order to determine the most appropriate and valuable actions to take.
• 35:19
  SPEAKER_00: and so you know this is how I think about the value chain in our market we ingest data in the top we then move it through classification orchestration and personalization which is where we work to understand things and then with that understanding where we take together the user context and the strategies that the business has and the user
• 35:37
  SPEAKER_00: preferences and behaviors.
• 35:39
  SPEAKER_00: We then take action.
• 35:39
  SPEAKER_00: We deliver push notifications, emails, SMS.
• 35:42
  SPEAKER_00: We change the product experience.
• 35:43
  SPEAKER_00: We deliver a message in an inbox for the next time they log in, et cetera, et cetera.
• 35:48
  SPEAKER_00: All those things kind of come together.
• 35:49
  SPEAKER_00: They're consolidated and coordinated.
• 35:51
  SPEAKER_00: But we always... Inherent in this is that we've made this decision to vertically integrate everything in the middle.
• 35:58
  SPEAKER_00: As soon as the data shows up, down to us talking to people, we've made sure that our software encapsulates all of that and that we do so in a way that's tightly vertically integrated so we can deliver a differentiated product experience through performance and scalability and raw capability, that we can invest in usability so that marketers can sit on top of the stack and be able to use, you know, we have a visual programming language tool called Canvas that lets them actually design the orchestration of all these things.
• 36:24
  SPEAKER_00: But we've also made sure that we have a really strong abstraction layer over the message channels, and we have a really strong abstraction layer over the data.
• 36:32
  SPEAKER_00: So the data can come in from anywhere.
• 36:33
  SPEAKER_00: It could come in flexibly from our partners, from data warehouses, from direct integrations into their products and services, that those complements to our product, that more data comes into us, the better use cases we can run, the more visibility we have into performance, the faster that that data gets to us, the more we can use it to make real-time decisions, that we can optimize experiments in real time.
• 36:53
  SPEAKER_00: We should not be in any way trying to gate the data that comes in, monetize that.
• 36:57
  SPEAKER_00: What we want to be able to monetize is in the middle of our value chain.
• 37:02
  SPEAKER_00: We price primarily based off of the number of monthly active users, right?
• 37:06
  SPEAKER_00: Because we want to charge a company for what they care about, which is building a customer relationship.
• 37:11
  SPEAKER_00: That's where we're able to value sell the best because we enhance the value of a customer relationship.
• 37:17
  SPEAKER_00: And so we're not trying to sell them a commodity.
• 37:19
  SPEAKER_00: We're trying to sell them a more valuable customer relationship.
• 37:23
  SPEAKER_00: And in doing so, we want to look at, you know, what are the things that we can put an abstraction layer over, data and messaging, so that we can capture that value in the middle.
• 37:31
  SPEAKER_00: And then we enable competition in both of the abstraction layers.
• 37:35
  SPEAKER_00: And so, when you're thinking through, kind of, where do I focus?
• 37:38
  SPEAKER_00: What do I build?
• 37:39
  SPEAKER_00: We, along the way, could have gone and chased down and tried to build all this stuff in the data world.
• 37:44
  SPEAKER_00: We could have built our own data warehouses, built our own CDP, built this other stuff, and a bunch of our competitors did that.
• 37:49
  SPEAKER_00: We also could have gone and tried to build every channel under the sun, and we built a small set of them in-house, but we were happy to partner for a bunch of other ones.
• 37:56
  SPEAKER_00: I mentioned the posts earlier.
• 37:59
  SPEAKER_00: We even can orchestrate direct mail to people.
• 38:01
  SPEAKER_00: but I'm certainly not going to buy any heavy machinery to be actually be printing mail right we're happy to partner with people on that but we've abstracted away the details of how that messaging gets plugged in so that we could choose where to focus and we put the vast majority of our R&D in the middle of this value chain and that's exactly where our pricing is and so you align the pricing the teams that are working with your product and and you know your vertical integration and your value chain together and then you get this R&D focus that creates that that kind of creates and compounds that value
• 38:32
  SPEAKER_00: And then let the rest of it, you know, let the rest of your compliments commoditize themselves and you'll be in a much stronger position.
• 38:39
  SPEAKER_00: Alright, so that wraps it up.
• 38:43
  SPEAKER_00: Quick summary before we go into Q&A.
• 38:45
  SPEAKER_00: The first thing up top, obviously change creates opportunity, but remember that change, both positive and negative, creates that opportunity.
• 38:54
  SPEAKER_00: So even if the change looks negative on its face, like we're experiencing a lot of in today's macro, that's still change that can create a window for you to go in and build value for your company.
• 39:05
  SPEAKER_00: The next one is that huge businesses are built on change that endures, not change that is chasing a shiny thing around or trying to track ourselves to vanity metrics.
• 39:15
  SPEAKER_00: Third one, be cognizant of that supply curve.
• 39:19
  SPEAKER_00: Don't exhaust yourself trying to push a rope when all you need to do is wait for the market to evolve.
• 39:25
  SPEAKER_00: Make sure that you're growing at the right speed and that you know what the drivers are that are going to enable your growth and at what pace as you move ahead.
• 39:33
  SPEAKER_00: Fourth one, satisfy the demands of today, obviously, but don't lose sight on that bigger tomorrow.
• 39:38
  SPEAKER_00: Make sure you know how your customer persona is going to change over time, how the market is going to change over time, and that you're building for that future opportunity because it's much larger.
• 39:46
  SPEAKER_00: And then finally,
• 39:48
  SPEAKER_00: Make sure that you're prioritizing by leveraging your value chain, that, again, you are aware of what the inputs and the outputs are, that you know where the vertical integration is the most important, and that you're actually focusing your R&D and your market development in the same place that you're generating value for your customers.
• 40:06
  SPEAKER_00: And in a perfect world, it's also tied exactly back to that change, as I mentioned, with the evolution of marketing teams over time.
• 40:13
  SPEAKER_00: All right.
• 40:13
  SPEAKER_00: So that does it.