Joseph Walla: Hi, I'm Joseph Walla. I'm the CEO and co-founder of HelloSign. And many years ago, we went through the process of getting from zero to $1 million in revenue, and so the organizers here asked if I could come and share some of those lessons. And I'm sure a lot of you guys have very ambitious vision for your companies or visions for your company. You wanna build billion-dollar companies. But fundamentally, the way you get there is, first, you have to go from zero to $1 million in revenue. So quickly, about HelloSign, we have 60,000 companies that use us worldwide, including Lyft, Samsung, Instacart and many others, and we have many millions of users across the globe as well. The reason why people use us is that, fundamentally, the way that people interact with each other in businesses are broken, and so we built a platform. We're an enterprise software platform. And many of the lessons we learned from going from zero to $1 million in revenue, are things and lessons that we still apply today.
JW: So, we've actually... Since we're an enterprise platform, we build our own applications on our platform, and we've gone to zero to $1 million twice, with two separate products, and we're actually in the process of doing that again with a third product. And throughout that process, we've actually learned a ton of lessons, and then, on the flip side, [chuckle] we've learned a lot about the myths involved as well that actually don't help you get there. And this is actually a pretty key moment for you as a company, to pretty much determine if you become an enduring company or not. So this is how I think about everything that we do as a company. This is a... It's this virtuous cycle of things that... You know that things are going really well.
JW: So if you have a really kickass team that's really excited and engaged and present every day, they then build an amazing product and acquire a lot of customers for you, which then drive revenue, which you reinvest in your team and you realize how important this is once you pull one of the things out of the equation. So let's say you have a ton of customers and a lot of revenue, but your team becomes really disengaged. Then all of a sudden, a whole bunch of your customers churn, which then negatively impacts your revenue, which then you aren't able to invest in your team, and then you can see how that goes on and on. Same thing if you have a lot of customers that don't pay you anything, you can't invest in your team, and then you're stuck at a small size.
JW: So I'm primarily gonna talk about revenue and customers today, just because that's what this conference is about. Doesn't mean these other things aren't important though. So on the revenue side, Silicon Valley is this really interesting place where we go through phases where revenue is sexy or it's not sexy. And it was unsexy for a while, and then all the sudden, in early 2006, there was this massive drop in SaaS valuations and everything dried up for a while. If you wanted to raise, you probably could've easily raised six months before, but you couldn't raise then, and then if you did raise, it was on worse terms than you would have imagined that you would've been able to get otherwise.
JW: And so ideally, you wanna build a framework for your company and how you think about things, that is durable from good market times and bad market times. So, I remember we actually gave this presentation to the company right when this happened and we said, "This doesn't impact us because we're cash flow positive." And everyone was stoked. So this is actually a controversial slide, but it's ironic that it's controversial, is that you should become cash flow positive at lease once. And there's a couple of reasons why you do this. The first one is, can you actually do it? I've talked to a lot of founders and the feedback that I get from people, they're like, "Oh, yeah, I could... Whatever." They give excuses for it. And then what I'm hearing is "I could get off of easy money any time I want, man. Any time, I'm off easy money." But I was like, "Until you actually see it, you don't quite believe it."
JW: Secondly, is that we're making these massive investments in these companies and we're investing years of our lives and we wanna know that the investment that we're making will actually have some type of outcome. And one way to figure that out is actually if people pay for your product and you're profit or cash flow positive. In addition to that, it also gives you a huge level of independence. So when the market pretty much crashed in early 2006 for SaaS valuations, people who had to raise, were raising at worse terms, and that means maybe they're giving up more board seats than they would have otherwise, the valuations were lower, or they were doing layoffs. Whereas, if you are cash flow positive or you have the ability to get there quickly, you have a level of independence that nobody else has. And then it also cuts out a lot of the noise. So when you go to these conferences, you read tons of blog posts. There's so much noise about the right thing to focus on. But if you've just focused on getting cash flow positive, ultimately, you've known that you've done the right thing because you've generated revenue, which is the ultimate output of any really successful company.
JW: [chuckle] So the other thing that I think about a lot is, you really need to challenge a lot of the truisms. Then there are many truisms, and there are things that we just say and we don't think about and we automatically accept them as truth. So one of them is "cheaper and better." It's like, "Hey, we just gotta get cheaper and better". And I would actually challenge that notion. How about you get more expensive and better? And that's really interesting, because when you're more expensive, you can hire more in the product engineering team, invest more in your product, and then you can justify your price more, which then you can use to invest more in your product to justify your price. And I'm not saying that you need to do this, but you should re-evaluate all those truisms. And I have a CEO that I know who actually... He'll look at all the pricing for his competitors, and then he'll price above it because he wants to trigger a conversation where they're like, "Why are you more expensive?" And he's like, "I'll tell you why, I'm happy to tell you," and then he explains how they have a better product.
JW: And then the other thing that people don't always think about is that being too cheap or free can actually lead to less growth. So in the early days, we were talking to a massive company and we were getting deep into the conversations and, ultimately, we ended up losing the deal. And I think one of the things is, is that, ultimately, they couldn't have... They didn't have enough faith in us that we'd actually be around because we are free. And so we lost that deal just by being free, which is really counterintuitive. And the other thing that we did early on is that we set up a whole bunch of AdWords campaigns. And what we realized is we were paying for these AdWords campaigns and we weren't able to get them profitable. And what we realized is that the way we were charging our customers is wrong and we weren't able to get... We wouldn't be able to get AdWords to be profitable if we continued to charge our customers that way. So we changed our pricing model, got AdWords to be profitable, but more importantly, once it became profitable, we could then invest all that profit then back into AdWords, which then led to much more growth.
JW: The other thing to think about, what we didn't do early on but we ultimately did and had a massive impact, was split testing pricing. So our investors told us many times that we weren't charging enough and we were like, "Oh, we're cheaper and better." And so we were repeating the same truisms. But what we did is, HelloFax in the early days was $4.99 a month, $4.99, and then we doubled it to $9.99. Had zero impact on conversion rate or churn. So we essentially just doubled our revenue with minimal effort doing pretty much nothing just by split testing pricing. And that was probably the most important thing we'd done all year. And when you think about the impact that that has on revenue, it's massive. So all the sudden, let's say you have 1,000 customers paying you $5 a month, that's $5,000 a month. We essentially went then to $10,000 a month by doing pretty much nothing that has a massive impact and burn your ability to invest in your customers, your ability to market, everything.
JW: One of the other lessons that we didn't implement for a long time was annual pricing. And this may feel like it's getting into the weeds a little bit but this is actually pretty significant. So let's say you have an 11-month payback period, so it takes you 11 months to make back all the money that you invested to acquire those customers. Now, if you have annual pricing, you effectively get all of that 11, all of that, back the same day that you acquire that customer, and then you're able to immediately reinvest that in acquiring customers again. And so that has a massive impact on your growth velocity, because instead of waiting 11 months, month after month, today you can acquire that customer again and then tomorrow you can do it again and over and over again.
JW: One thing I would love to reframe how you think about usability. Usability is very powerful when you think about it from the standpoint of decreasing your CAC, which is your cost to acquire a customer. Now, friction and difficulty equals costs. Let's think about this for a moment where, let's say it's really hard to sign up for your service, and then, so you've gotta talk to sales to close the customer. And then, let's say it's really hard to implement. So you've got the implementation specialist, which is a cost. And then, let's say once you're using it, it's really difficult to use, and then you've got the support team supporting it. So all of those are costs, and that makes it really difficult for you to acquire customers. Where on the flip side, let's think of the vision where, really easy to sign up. They don't have to talk to anybody. Really easy to pay, really easy to use. And I think this is one of the reasons why we, as a company, we raised a relatively small amount of money in the early days. We were able to have a significantly higher impact because, whereas a lot of our competitors had massive friction in order to just use them, to just pay them, we had almost no friction, which had a huge impact on our growth.
JW: Now, this is an interesting thing, and we did this in the early days and I'm really glad we did because I think the impact would have been very different if we hadn't. So in the early days, we were in this hyper-growth mode, and instead of partying every month when the growth numbers were coming in, we were like, "How about we project this out for the next year or two years?" And what we did is we looked at the LTV, the lifetime value. We looked at the CAC, the cost to acquire customers. We looked at the churn rate, and we were like, "This, in about a year or two years, is actually gonna look like this." And so what we did is, because we anticipated all of this in advance, we were able to completely change up our strategy. These are all made-up numbers, by the way. [chuckle] We were able to completely change up our strategy and then make it so where that yellow line flattens out, it actually continued upwards. But the only way you can do that is, instead of thinking month to month, you needed to project in the next year or two to make sure the party doesn't stop. Cool.
JW: So moving on to customers... So this is another counterintuitive lessons. We all hear, "You've gotta talk to your customers," and I'm still on the phone with customers all the time. But you have to be really careful of not listening to them too much, because we did that in the early days and they told us a lot of confusing and contradictory things. And we innovated a ton on the pricing. It became very complicated, and then our customers didn't even fully appreciate the innovations that we'd done. And then we made this big investment to rip all of that out and then move to industry standard pricing. It was just too complex.
JW: And the other lesson that we learned early on is that there's kind of... If you look around and if you're just selling in the startup world, those companies really aren't reflective of the rest of the world. They have... If you think about the two people in their garage, their budget is probably gonna be significantly smaller than the 20, 30 or 500, 600-person company. And so what you need to be really careful of when you're creating your pricing, you don't just listen to the people in the garage to dictate what your pricing is because that will leave tons of money on the table when it comes to actually selling to the rest of the world. And we experienced this a lot where, at our scale, it's not, "We'll spend 10s, 20, 30 thousand dollars in software." And as a small company, you're talking to small software companies. I just wouldn't have even realized that people are willing to spend that much money on software. So you have to be really careful about who you listen to on pricing.
JW: And then the other thing, similar to who you listen to on pricing, you should [chuckle] also be careful of who you're listening to on features. Is it someone who will pay? Is it a big market? Is it a deal breaker? Because a lot of times, people will tell you solutions instead of telling you problems. If they tell you a problem, then you can maybe think about a different way to solve it that doesn't involve this brand new feature. And I think if the only thing you take from this slide is one thing, it's that consumers and businesses have dramatically different profiles when it comes to functionality or pricing. And so if you only bifurcate your customers in one way, do it that way. Certainly, it'd be great if you did it in different ways as well.
JW: So the other part, and this ties into my comments earlier about our growth rate, looking into the future and it potentially flattening out, but actually thinking about how do we keep that growth going, is it came down to focusing on the right customer. So if you have 100 customers, and certainly you can serve all different types of customers, but if you have the right customer, you look at... Say, you have 100 customers, excuse me, and let's say 10 of them have an amazing LTV, really low churn rate, really good repeatability, they seem really happy with your product. What you do then is you take the entire company, all of the departments, and you focus on the marketing team finding more customers like that, the sales team on closing more customers like that, the product team on building the functionality that makes that type of customer happy, the support team on making sure that it gets implemented and it's successful. And that's how you get really successful and that's how you keep that growth trajectory going.
JW: So team slide, or team, this is something that I needed more than 20 minutes to talk about. When I talked about all the different variables that make your company successful, this is absolutely crucial. So, the amount of time I'm spending on it is not reflective of its importance. So I was thinking about, if I had a limited amount of time, what's the one takeaway? I think the one takeaway would be, hire team officer HR early, like earlier than you'd imagine. I think if you're 10 or 15 employees, that's the moment where you should bring the first person onboard. And this person should ideally have a HR background. It shouldn't necessarily be someone who's just an office manager and admin in the past. Someone who actually has an HR skill set. And the reason why I say this is that, usually when you're really busy, the only things that get done really well is if you have a person whose entire job is focused on making that thing happen. And so if your team is truly important to you, and you're doing all of these things to push revenue and customers, you should at least have one person on team that's completely dedicated to making sure the entire team is happy.
JW: So tomorrow, [chuckle] you guys are gonna wake up and you've had an entire day of presentations, from a ton of different people, and there's just gonna be so much noise and you're gonna ask yourself, "What do you wanna focus on?" Very early on, we also had these big debates. One of our advisors said, "Hey, would it hurt your company if you spent just the next six months and only focused on revenue?" And we said, "No, it wouldn't." And so we focused on revenue for six months and we had the highest revenue growth rate we've ever had as a company. So my challenge to you is, actually, to go back and if you take one thing from this presentation or maybe even the conference, spend the next six months pushing revenue and seeing the impact that it has.
JW: So thanks, everybody. As I mentioned early on in the conference, or in the presentation, I'm sure you guys have massive visions. Twilio guys, they had a huge vision as well. They thought SMSs and telephony should be really easy to integrate with a couple lines of code. For us, the vision that we have is that, when you buy a house, you buy a car, the hard part should be the decision to buy the car, not all the paperwork surrounding it. But if you guys wanna get to your vision, you first have to get from zero to $1 million in revenue. So hopefully, this is helpful.
JW: And happy to answer any questions, if you have them. Or you can not do questions and rush off and drink. [chuckle] Yes?
Audience Question 1: Hi. First of all, congratulations. Amazing company. I think signing and dating PDFs is decades-old problem that, to me, never got solved until HelloFax and HelloSign came in. So...
Audience Question 1: Amazing job.
JW: Appreciate it.
Audience Question 1: How much of the growth was attributed to network effects versus paid acquisition in this HelloFax and HelloSign model?
JW: Yeah, a lot of the early growth was for self-serve and word-of-mouth. And what we did is we built a really intuitive product for a problem that seemed really clear to people, and then we got tons of word-of-mouth out of it. And then there's also some natural virality into signing documents, because when I sign a document I definitely involve somebody else and then they get introduced to the product. But with that said, when we talked to a lot of investors and we told them all of that, a lot of times, investors, what they would like to see is that you've been able to prove and validate paid acquisition channels as well. So for the first chunk of years, it was all self-serve, and then we didn't pay for acquisition at all. And then later on, we started including paid acquisition.
JW: Cool. Anyone else? Yeah.
Audience Question 2: You referenced, in your presentation, a change in the pricing model that made AdWords profitable.
Audience Question 2: Could you give a little more color on that?
JW: Yeah, definitely. So there are a couple of different things that we had earlier on, we only had one type of paid plan and it was $15 per user per month. And then we also had something that was complicated where you could have free users and paid users, both on the same team, and so that was a little bit confusing. And so what we did early on... So we looked at... If we were to zoom out a little bit, we looked at the entire funnel and we were just like, "Why is this AdWords campaign not working?" And we put action items in every step of the funnel, and ultimately, it had to come down to the pricing plan. And so what we did is we introduced... Essentially, we hired price plans, which helped make the entire flow profitable. Does that make sense?
Audience Question 2: Yeah.
JW: Well, interestingly, to add on top of that, people are interested and willing to pay more money for additional functionality, and that's... We just weren't bifurcating that well enough as a company. We were thinking, "Wow, why don't we just make it really simple and it's $15 per user per month for everything," which is... Which I think was under-charging for the product.
Speaker 4: So how do you when to stop finagling your pricing? [chuckle] So you're doing all this testing, all these splits, but how...
JW: There is a point where there's diminishing returns, for sure. So with the HelloFax pricing, there's a $5 per month, and then we also tested out $10 per month, and we tested out $8 per month. And at a certain point, we had a large group of numbers that we were testing at once, and then we ultimately just picked the one that performed the best, and then we settled with that for a while.
Audience Question 3: Cool.
Speaker 5: So you mentioned, when you doubled revenue from $4.99 to $9.99, it didn't affect your churn. But how did it impact conversions? Did you have fewer companies paying more? Or, did that not change either?
JW: Yeah, that's the crazy part. That didn't change either. So our conversion rate and our churn were pretty much didn't have an impact.
Audience Question 4: Gotcha.
JW: Yeah. So we just made more money, that's all.
Audience Question 4: Amazing.
JW: [chuckle] So that kind of re-frames how you think about everything, right? When you're prioritizing feature development, maybe you just spend... And I think this is why it was so impactful when our advisor told us to spend six months on it, because I think it's very easy not to spend time on those things because there's another feature you wanna build or there's an optimization. It's not a sexy thing to work on, but it's probably one of the highest impact things you can do.
Audience Question 4: One final question. How did you decide to unbundle HelloFax and HelloSign? At what point did you say like, "Okay, this is a separate business?"
JW: Yeah. So what we did is, originally, we had the HelloFax, we built out a ton of e-signature functionality into it because we never... We're gonna be a long-term HelloFax. And there was just confusion. People were just not realizing that we're an e-signature company, of course. And then at that point, we just took out all of that functionality and then launched it as a separate product. So there's branding confusion by having it all together. And then there's something very intuitive, like HelloFax, faxing, HelloSign, signing, HelloWorks, workflow, that from the moment people hear about the company and still getting into the product and testing it out, is very straightforward. And that's the main reason why we did it that way.
JW: Any other questions? Great. Thanks, everybody. I really appreciate it.