Latest / GTM Made Simple / This $25 Billion Company's GTM Strategy Is To Build NOTHING
Transcript
- This is going to be the most boring video you're going to watch if and watch it only if you want to make your business profitable. Otherwise, go watch a video that talks about AI innovation and all that stuff. In reality, 99.9% of those businesses are going to fail because you're going to love this. I'm about to tell you about a company that just IPOed that is 25.7 billion. They surged about 40% on day one. And here's the crazy part. They don't build anything. [music] They buy literally broken SAS companies, products that were pretty much dead or nobody really wanted to buy or do anything. As [music] a matter of fact, VC says take it, take it and they just make them profitable. Think about AOL, [music] Evernote. I actually still use Evernote, by the way. Meetup, Vimeo, Eventbrite. You all have heard about these things. These names are probably something that you thought, well, dead. Bending Spoons bought them. They did three things. Cut cost, raise prices, and fixed unit economics. And now they are worth more than any other typical SAS business that is trying to do AI innovation right now. And as you're talking about it, you might be like, man, I'm doing all this innovation with AI with all the stuff. Guess what? The most innovative SAS companies, [music] they are tanking because they don't know how to monetize it. So, let me say that again. The market isn't rewarding innovation anymore. Although [music] it's fun to be at 3:00 a.m. in the morning and going away at your chat GPT or cloud and say, "Oh, how awesome this is." But if you can't make money, it means nothing. What the market is rewarding right now more than anything is operational excellence, operational discipline, operational unit economics. And that changes everything and I want you to know this and think about this from the standpoint of 100% go to market. If this is not a case for go to market is the business, then I don't know what is. There are all these SAS debt businesses out there and services businesses that are getting gobbled up by smart individuals like this incredible company and what they are doing is saying you know what we just need to fix their go to market that's it so in the CEO round table this time we had about 10 CEOs because this was a huge topic and they were again a mix of roughly 10 million to 60 million in ARR all B2B SAS B2B services all [music] that I put this up said hey look do you know anybody know about bending spoons and they're like yeah we kind of heard I don't know but some half of them said, "I don't know." I'm like, "Hey, they IPOed at $25.7 billion." They're like, "Oh, it got their attention." Let me tell you, first day they were up 40%. It got more attention. Q1 net income. Let me tell you, it's 27.4 million profit. And then I showed them the prior Q quarter, right? 259 million in revenue, $12 million loss, and they went from losing 112 million to making 27 million profit while more than doubling their revenue. one CEO again, let's call him Georgie. And Georgie said, "Wait, how is that possible? They're not building new products. They're not building AI." I'm like, "Yeah, yeah, yeah, but you're missing the point, Georgie." This is exactly the point if you think about it. Now, Georgie, as a matter of fact, he runs about roughly 35 million AR company, great product, solid engineering team. By the way, probably have the most robust [music] AI capabilities. He's actually hiring people and spending tremendous amount of money from all over the world who know a lot more about it. But he's burning about 400k a month trying to build the next feature, the next integration, the next AI capability, whatever that is. Meanwhile, I'm showing him and the group bending spoons. They're buying dead SAS products that products that already exist, already have customers, already have revenue, and just making them profitable. Just running great go to market. No new R&D, by the way. No new AI hype that we all are running after. No, we are going to change the world kind of pitch to investors. Just plain old unit economics. Nobody's buying AI innovation long-term. They're buying profitable businesses. So, what I'm about to share with you is how Bending Spoons actually did this because I dug into this. I've built two companies. I have seen terminus go from 0 to million to 5 to 15 and I have a $100 million plus exit. I've acquired four to five companies is building that thing. I was part of part which was a $10 million in revenue company be part of a $10 billion company with Salesforce. So I'm being part of building products and building markets and all those things. And here comes Bending Spoon and they are literally changing everything I thought I knew about building business because they are fixated on go to market. All right. So here are the four things how their model works and it's phenomenal. Step number one, they buy venture zombies. That's what I call them. They're zombies. These are venture zombies because VCs actually put a lot of money in it. These are companies that raised a ton of money. They build products that people are actually using on a daily basis, but they never really figured out how to make money. Sounds crazy, right? Like you build all this thing and cannot monetize. That's the game. That's go to market. So what happened? VCs gave up on them. The founders moved on. The product still there. Still have users, but nobody knows what to do next. Evernote, for example. I still use it by the way, which tells probably how old I am. But Evernote, if you remember them, they had 200 million users at its peak. Couldn't figure out how to monetize it. And Benning Spoons bought it. You know what happened? I'll tell you that story in a second. Meetup 50 million members know that. I'll tell you in a second. We work a disaster. Benning Spoons bought it. You know what happened in a second. Vimeo, Eventbrite, AOL, all acquired. That's step number one. literally go and buy zombie venturefunded companies that don't know how to run their go to market because go to market is the business and if you don't know that no matter how amazing your product is doesn't matter here's what step number two here's what they did with them so once you buy it they actually went and they cut cost now they didn't cut cost because of AI and just slopping that no no they cut cost aggressively they came in looked at the orc chart asked one question what actually is driving profitable revenue all right everything else out. Engineering teams that were building features nobody asked for, cut. Marketing spend that wasn't converting, cut. Office space, nobody coming, cut. They were ruthless about it. They did not apologize. They were here to just turn around the company, make it profitable. Hard times as soon as you see that, but it's better than dying, right? Step number three. This is the one that actually got me like, wo, that is a cool move. They raised prices. Now, you might think like, well, if they can't monetize, the founders couldn't monetize, the VCs couldn't figure that out. How in the world are they raising prices when they're already have a shrinking market? Well, here's the thing that you need to think about. Like, this is the part most SAS businesses are just afraid to. Bending Spoons looks at a product and says, "People are using it. They are actually getting value. Why are they charging $5 a month?" And you want to do that because you want to say, "Well, let's get 100 million customers. That's five." Whereas, they're like not interested. They just literally simply without doing much product enhancement or any of that stuff, they just raise prices. Sometimes 2x, sometimes 3x. And here's what happened. This is this is interesting. This is this should be news flash. When I looked and dug in the data, I was like, "Wo, some customers left, of course." But the ones who stayed are the ones who acted and valued the product. Anyway, the revenue went up. The churn just stabilized because you only had the best customers staying with it. And the most important thing, which is why they're profitable, unit economics improved big time. Which brings me to step number four. And then this is what they did, which is the hardest [music] thing. If you're a founder, CEO, just close your ears or open your ears, however you want to look at it. They let it run. They didn't add new features. Evernote mine is the same exact thing. No pivots. No, we're not going to add AI to everything of sorts. They just let the products do what they already were doing. but profitably 84% of their revenue is subscription period. Recurring, predictable, profitable. That's the playbook and that's what got them to be worth over $25 billion. So, here's why I'm so excited about go to market because that's in a quintessential way of thinking about business. [music] Go to market is the business. I'm going to buy a t-shirt that says that. Okay, I need to really get it. Go to market is the business. Great companies die with great products because they didn't do anything. They didn't figure out a way to monetize and here it is some folks coming in saying, "Hey, hey, this is a great product. Let's only focus on the same customers." That all sounds boring. Don't we want to create innovation? Well, nobody's buying innovation. Most SAS companies are playing the wrong game and you probably are doing the wrong thing right now. You might be chasing growth at all cost. You might be building features that nobody has asked for, but you think it's can cla can do it, so let me go do it. You might be spending about roughly 40% of your revenue on sales and marketing to acquire new customers. And guess what? In 12 months, they might be turning. And so you go after and try to acquire more customers. And that's why your cost of acquisition goes up. And you wonder why your valuation is tanking. And while bending spoons, on the other hand, is simply surging. The market has shifted. My friends, the most amazing thing that's happening right now and the CEOs don't notice you and I I included am not noticing until this happened until I dug into this is this market is rewarding profitable growth over momentum growth. Okay, bending spoons went from a negative 112 million to positive 24 million profit in one year. Now that's not a growth hack. That's just operational discipline, excellence, just brute force thinking about what works and focus on that. Unit economics will always win over innovation in the long term. That's how businesses are built. Great businesses again if you're open AI, if you are Tesla, if you are SpaceX, great. 99.99% of you are not building that kind of business, right? So what you need to think about is unit economics because innovation is only to get you in the market but once you're in the market unit economics is what keeps you in the market and that's about not necessarily building new products that's about fixing the broken things in your product in your business and the marketing is all about how do we get more people to stay and work. So what's going to happen is unit economics is more important than innovation. Secondly, efficiency is going to be more important than activity. So, you need to cut everything that doesn't drive revenue. No sacred cows, no pet projects, none of that. No, but we have done this this way. No, no, no. This is a new game, folks. If you want to really live, I want you to be like really understand. I'm so passionate about this is because companies die, people lose jobs, your 10 years of worth is gone purely because your ego is too big and you don't realize the game has changed. Go to market is the game. And if you're still playing the old game of raising money, burning cash, hoping for an exit, and or just random and building AI features all the time, you're already way behind. So I want to give you a framework really helping you understand how to think about growth. Think about momentum growth and profitable growth. All right? So momentum growth is like look, revenue is up, activity is up, everybody's busy, people are building new product, services. You might be spending about a $150 or $2 to try to get a dollar and hoping that at some point you will turn profitable. Well, that works when you are a VC backed company or PE company that's putting money in it. But over a period of time, just like all those zombie companies that once upon a time had ton of money in them, those VCs are going to leave and then you as a founder will also have nothing to do. And so instead of that, what I want to encourage you is to think about profitable growth. Revenue that is not just up for the sake of it, but unit economics are up. You're retaining the most profitable customers. You're expanding with the customers and ICB that actually want you. And think about your cost of acquisition. It should go down because you now know who to focus on. Not how many, who is the more important question. You're going to have a profitable segment. not just growing segment but a profitable segment and that's what really compounds bending spoons this story is so good for everyone thinking about go to market and wondering like well I'm not think no no no as a CEO you have to own go to market otherwise a company like bending spoons is going to come in and look at your beautiful product and going to say oh [music] great I'll wait for you to die and as soon as you die I'm going to pick it up and I'm going to make it profitable and you will have nothing that you could do bending spoons is an extreme version of profitable [music] growth that you can actually do that right now in your company. They don't even try to grow the product. They don't even try to innovate the product. They just want to make the product profitable. What a novel idea. And the market is saying that's worth more than your AI road map. Whatever that is, it's worth nothing compared [music] to making your business profitable. So the question I asked to Georgie and all the people in the SEO group that we run is like, hey, [music] which type of growth are you building? Because the market has made its preference very very clear. And here's the uncomfortable kind of truth that nobody really wants to say it out loud and you may not want to hear, but I'm going to say it because I want to make this video as boring as possible that most SAS companies are not going to go IPO. Like I really wanted my last company to go IPO, but it didn't happen. And you know what? I'm okay. The outcome was great. Most SAS companies are probably not going to even get a acquired by strategic big buyer like 10x like part. I was truly truly blessing of God that we had a 10x return like 10 million revenue and we had you know at a $100 million exit. Terminus was incredible because the exit was like over $100 million plus private equity. So in both times I was very fortunate to be doing that. But that's not true for most of you. I'm sorry. I'm just going to say it out loud. It's just not going to be true. So the question is like well what do I do? And most SAS companies are going to run out of money. If you do not figure this thing out, you're going to run out of money and someone like Benning Spoons is going to come in and just look at this and wait for you to say, "Hey, I I can't do this." And they're going to come in, buy you, give you nothing, kick you out, and then they were going to do what you should have done, which is cut 60% of all the cost that doesn't drive profitable growth and get back to building a profitable business. Get back to go to market, not AI, go to market. So, if you're a CEO who have been at this for, let's say, 5 10 years or more, this is what you should focus on. You should focus on go to market not later now. The market is not going to wait for you. Bending spoon is a proof that most valuable thing you can do right now is to not build a new future is to build a business that makes money like profitable money. And if you're a CEO watching this, here are the four things I would do if I were you. Number one, I would run unit economics on every segment. Okay? Not just blended, which is what a lot of people do, but by ICP, by deal size, by channel. I'll figure out where you are actually making money, like your gross margins, and where you are subsidizing growth with cash you don't really have. And that's number one. Number two, I would ask myself like, would I cut this if this is not profitable in next 90 days? Like, you have to make that. What are you going to cut? Now, what would be nice to optimize this new AI feature that one customer asked you or you think it would be amazing and you sit in your own little cave at 3:00 a.m. in the morning doing this thing? That list needs to be gone. You need somebody independent in your company that will just speak directly to you because you're going to lose your business. I'm like mad how many businesses die because you can't get rid of your ego. Cut the list. When Steve Jobs came back to Apple, you know what he did? He actually looked at number of products. There were about 350 different product lines happening. He cut it down to 10. That's what made Apple such a profitable business. See, everyone does it. At some point, you as a founder do it or you'll have some leg bending spoons come in and do it for you. That brings me to number three. This is what I would do. I would consider raising prices. That's what they did. I know it sounds scary and then you might be afraid of churn and that's going to naturally happen. But see, bending spoons proved the case. They raise prices on every product as soon as they acquire. They look at the revenue and they say, "Yeah, let's raise prices." is they expect 30 40% churn happening in it. But then the 60% because you're going to raise prices to 2x 3x. It's going to cover the revenue. You're actually going to end up making more money and cutting the customers that actually never wanted to work with you. Anyway, I bet n out of 10 of you, if not all of you, are underpriced and you know it. You know it. You are leaving money on the table, but you're not jumping into it. And therefore, you're attracting wrong type of people because you're not willing to raise prices. You might be just scared. And I get it. I've been there. At Terminus, the first deal we closed was for $250. $250 a month. First deal. By the time we were done into three years, we were closing the same type of deal for $100,000. Do you know what happened? My team kicked me out of the sales process because I was too afraid to raise the price. Literally, they would say, "Sang, come and talk about the ABM, the space that make the customer feel loved and and that you're for." But never ever talk about pricing because you know what I wanted to do? I loved my product so much I wanted to give it for free. I really wanted to give it for free. And the salesperson who had a quota with me, they're like as soon as they asked about pricing, they would literally put their hands on my mouth and said, "Don't say anything because I'm so excited about the product I'm building." And that may be what you're doing. You're probably very excited about it and you would be die if you want to raise prices. So don't do it. Have somebody else do it for you. But you got to do it because if not, bending spoons is right around the corner looking to buy your product [music] for nothing and you'll be kicked out. And I'm not dishing on them. I'm actually saying that makes sense. I actually think that [music] should happen to owner, business owners who don't want to take this seriously. And here's the number fourth thing I would do. Probably the hardest thing to do. I'll stop chasing the next AI feature. Your next AI feature isn't going to save you. The next AI integration isn't going to save you. What's going to save you is going to be how do you make profitable business and what [music] actually works. Here's my blunt advice to every CEO and every go to market leader listening to this. The market today isn't rewarding innovation anymore. You might think everybody is rewarding that, but that's actually not what's happening. They're not. It's rewarding operational excellence, operational discipline. Benning Spoon just proved that you can build a $25 billion company by buying broken SAS or services business and make them profitable by doing simple things like cutting cost, cutting innovation, cutting all of that and building a profitable business. No new products, no hype, just [music] unit economics. That's what go to market is. That's what go to market operating system is. So, if you want to figure out how to do this thing before it's too late, well, go to run ongtmo.com/move, an assessment that will help you figure out what stage of the business you're in and how to navigate these valleys of depth. That's what we call it, the valleys of death, and build a profitable business. So, if you're ready, let's get moving.