Ara Mahdessian: ServiceTitan Would Not Be the Success if We Raised VC Earlier | E1175

1. 0:00 – 1:05

   Intro

   1. AMAra Mahdessian0:00

      So, great leadership is about one thing, deliver extraordinary outcomes. That typically involves one decision about where to play. Successfully executing where to play involves hundreds of great decisions on execution.

   2. HSHarry Stebbings0:13

      Ready to go?

   3. NANarrator0:16

      (instrumental music)

   4. HSHarry Stebbings0:27

      Ara, I'm so excited for this, dude. I am probably one of the biggest nerds on your business that exists, uh, which is p- probably one of the many reasons I'm single. No offense (laughs) . Uh, but it's a pleasure to meet you, my friend, and I'm so excited for this.

   5. AMAra Mahdessian0:39

      Very grateful for the kind words, Harry. Uh, big fan of your show. You, you interview and speak with a lot of great companies, great founders, great CEO, so very much humbled to be i- included in such esteemed crew, so thank you.

   6. HSHarry Stebbings0:54

      That means a lot, my friend, but I, I think we're shaped often a lot by our childhoods. And, you know, I remember when my mother told me that she had MS, it was, it was a, a very impactful moment for me, uh,

2. 1:05 – 4:12

   Childhood Experiences

   1. HSHarry Stebbings1:05

      in terms of who I am. When you think back to your childhood, what was the most impactful moment to you in shaping who you are, do you think, Ara?

   2. AMAra Mahdessian1:12

      First of all, I'm very sorry to hear about, uh, your mom and, and her struggle. I do think a lot of people are often shaped by adversity. And so for me, you know, for some context, so, uh, I'm Armenian-American, uh, but I was actually born in Iran and I was born during the Iran-Iraq war. And so, you know, to this day, my mom still shares the stories of how, you know, while she was in the delivery room with me, you know, the sirens would go off in the city as the city was about to be bombed, and so they'd have to rush her down into the bunker, into the, you know, bomb shelter, uh, at the hospital, and then when the sirens were off and everything was clear, you know, they'd bring her back up. And I was actually born, uh, in that kind of environment. And of course, like, you know, many people at the time, we, we ultimately shortly thereafter, uh, immigrated to the United States to get to chase and live the, the American dream. And like most immigrants at the time, you had, you came here with no knowledge of the language, no jobs lined up. You really couldn't take any of your personal wealth. And so, you know, I, I think about what my parents went through bringing three very young kids, uh, over to a new country, and then having to learn a new language, find a job, make ends meet, uh, put food on the table, and ultimately do everything they can to, you know, give their kids the opportunity of pursuing and living the American dream, and, like, that weighs extremely heavily on me. I, uh, that's a incredible responsibility that I'm, I'm very grateful that they went through that journey so that I could have the opportunities that I have today. And so, you know, it weighs very heavily on me to do all I can to in some way be worthy of that kind of sacrifice and, and adversity.

   3. HSHarry Stebbings3:09

      I love that. And it's funny, you know, when I look at the thousand interviews I've done with some of the best entrepreneurs of our time, the biggest commonality amongst them is actually, you know, the majority moved in their childhood. You're forced to assimilate with different cultures, different environments, and reinvent yourself in many respects. Um, and it's a big commonality in the best.

   4. AMAra Mahdessian3:28

      You know, the, I was thinking about this the other day, the, the equivalent of me today giving up everything that I know and then having to move to a country that, you know, I've never been to, know very little about. I mean, just imagine, like, I have to move to Japan or China, and this at a time where you don't have, you know, Google Translate on your phone, and there's no AI real-time translation service. And for me to have to figure out how to learn the language and, you know, find a job and make ends meet and provide for my kids, I mean, that is un- unconscionably hard. As hard as building and operating a startup is, I suspect that is significantly harder. So kudos to all the parents that and individuals that made that journey and were successful at

3. 4:12 – 11:09

   Meeting with Byron Deeter

   1. AMAra Mahdessian4:12

      it.

   2. HSHarry Stebbings4:12

      Life is made up of, of big yeses and painful nos. When you think about the biggest yes that you got and the most painful no, what were they?

   3. AMAra Mahdessian4:22

      Probably the first customer yes that I got was incredibly consequential, uh, in my life. And then shortly after that, you know, the, the first yes I got from an institutional investor was also incredibly consequential in, in my professional life.

   4. HSHarry Stebbings4:42

      Who was that investor?

   5. AMAra Mahdessian4:44

      Byron Dieter at Bessemer. There's a, actually a fascinating story be- behind it maybe at some point. You know.

   6. HSHarry Stebbings4:50

      Oh, no, no, I love a good story. How did it happen?

   7. AMAra Mahdessian4:52

      We were part of an accelerator in LA called Mucker Labs, which is also a phenomenal program, and the guys at Mucker have been so instrumental in our journey. And, uh, Byron's team was present at our demo day, and at the time, we were not necessarily convinced that we would ultimately take institutional money. We, we didn't understand the venture capital world. You know, we had some of the typical stereotypes in our minds that, you know, these guys might be sharks and they're after our business, and, I mean, it was all completely unfounded. That was the illusion we were under. And so we participated in the demo day just to be able to show off, you know, what we were working on. And Byron's team was in the audience, and Byron's team connected with us, and, you know, ultimately they saw potential in what we were building, and so they offered to connect us with Byron. And even though we didn't want institutional money at the time, we knew Byron was, like, the best early stage investor in B2B SaaS. You know, the, he had invested in Procore. Bessemer was also an ad- investor in Toast, in Shopify, all these great companies that we were trying to mimic their journey. And so, of course, we jumped at the opportunity to get to talk to Byron Dieter. I remember his team set up a call.... and I hop on the call with Byron, with my co-founder, Vahe. And, uh, Byron was probably in between meetings and he's like, "Ara, it's great to connect. Love to talk to you. You know, we only got 20 minutes. Maybe the, you know, first 15 minutes, I, Byron, can ask questions about your business to learn more about ServiceTitan. And maybe the last five minutes, if you have any questions for me, you know, feel free to ask me anything. I'm more than happy to be helpful." And I was like, "Fantastic." Byron asked one question. Uh, the first question I remember was probably about our go-to-market motion or something like that. And he was like, "Tell me, how does the go-to-market work in, in this industry?" And so I explained to him how our go-to-mark- market works. And then I just went in, I'm like, "Byron, please tell me, how does Procore's work? And how is it different for their enterprise segment versus their mid-market versus their SMB? And how does that compare to Toast? And tell me, what kind of, uh, what's their model for customer success and how do they comp these people? And how long is the implementation process? And tell me, when did they start building the next, you know, product to be multi-product company? And when did they decide to move into the next customer segment?" And I just peppered him with so many questions. And, uh, shortly thereafter, you know, I think we were an hour and 30 minutes into this conversation, and Byron's like, "Guys, I don't know where all the time went, but I have a board meeting starting in two minutes. I gotta hop off, and I'd like to have another call so I can actually learn about your business this time." So that kicked off this relationship where we found him to be so insightful and helpful. And so after a series of conversations, you know, it, it was clear we both wanted to partner. Yet Vahe and I were still very, you know, nervous and hesitant about what it means to take institutional capital. Uh, and you know, we're, we're so focused on making sure our customers are successful and, you know, we didn't want our mission or our values or anything like that to change. And, uh, months later, I was heading up to the SaaStr conference, Jason Lemkin's conference. And, uh, on the, the flight with me was another founder in LA. And I asked this founder, you know, because he had raised a lot of institutional capital from, like, a lot of the best names in the industry. And I asked him, I said, "Look, I have this opportunity. I have this offer from one of the best investors. I don't wanna say who it is. Can you share with me your experience taking institutional capital? And, you know, would you recommend I do it too?" And my good friend told me on that plane ride, he's like, "Look, I know a lot about your business. You built a great business. I think it's a special business. I would not take institutional capital 'cause you risk a lot of things changing that you otherwise might not want changed, and you guys don't need it." And so my mind was kinda set that I wasn't gonna go into this partnership. At SaaStr, my friend and I kinda got split off at one of the conferences. And then at lunch, I was talking to Byron's team 'cause they were at, at, at the conference. And my friend happened to walk by, and he said hi to me, of course. And then it turns out he knew Byron's team so he said hi to them too. And then he was like, "Wait, Ara, why are you talking to customer?" And then he put two and two together. He's like, "Hold on. Is it Byron that gave you that offer?" And I didn't divulge it, but he kinda figured it out from the smile on my face, and then he just went completely red. And he pulled me aside. He's like, "Ara, I feel like I've done the biggest disservice to you one could do. If this is Byron Dieter, this is the one person you have to partner with. He's the best B2B SaaS early stage investor. He's an extraordinary human being. He's so aligned with your values. He will help you build a great company, and you will end up doing it the right way, in a way you can be proud of. You gotta partner with him." And so when I realized, I'm like, "You know, Byron is probably the same DNA as us." And so I texted Byron. I'm like, "Byron, I'm in." And then he texts me back. He's like, "Where are you at right now?" I told him, I'm at SaaStr. He's like, "I'm sending you an Uber. Hop in." I hop in the Uber. Takes me to his house. You know, we, we celebrate, hug, and shake, et cetera, and he brings out the term sheet. And he's like, "Let's sign this now before you change your mind again." I'm like, "Look, Byron, I'm a man of my word. I said I'm in. That means I'm in. Uh, before I sign anything, I want you and your team to come. You know, do whatever conversations and diligence you want with my team. Make sure you're going in with your eyes wide open, there's no skeletons in the closet. And if at that point you still wanna move forward, I'll sign happily." And so that's how we partnered. And, you know, it's been a, a fascinating and amazing journey ever since. And everything has, you know, exceeded even those fanciful expectations.

4. 11:09 – 16:11

   The Power of Product-Market Fit

   1. AMAra Mahdessian11:09

   2. HSHarry Stebbings11:09

      Dude, um, I told you at the beginning, I'm a nerd on your business. Like, Sa- Byron and Jason Lemkin were, like, two of my heroes growing up. You know, most people have, like, you know, Pamela Anderson on your wall. I, I would've had, like, Byron Dieter and, like, you know, SaaS napkins on their wall (laughs) . Uh, I told you, not normal. Uh (laughs) , uh, but I, I have to ask you, when we look at a business like ServiceTitan, it looks all up and to the right. Did you have immediate product market fit? I'd just love to understand from those early conversations, from those early customers, was it always just up and to the right?

   3. AMAra Mahdessian11:41

      No. It, it... Every success story looks like an overnight success story. I mean, look, everybody's talking about NVIDIA today, but NVIDIA was founded 30 years ago, right? Probably in, around '93 or something like that. And for us, it was similar. The, the overnight success story, that overnight piece was, like, over a decade long. So I still remember our very first customer, what I mentioned about kinda the, the first yes. Uh, this individual, John Aucoin, today has one of the most successful plumbing companies...... in the country called Rooter Hero. You know, a very large business, they do exceptional work for the community and ... But at the time, you know, he was a much smaller business than he is today. But he was still one of the most, you know, well-known plumbing companies. And, uh, y- we earned the opportunity to meet with him, and we shared with him what we had built. But this was very early on, so it was nowhere near ready, and we very transparently shared with John, "Here is our vision. This is the solution we intend to build. This is the ROI that we think this solution will deliver for you. This is the small piece we've already built. The rest, we have to build. Will you go on this journey with us?" And, uh, you know, we were shocked that he was like, "Heck yeah, this is exactly what I need in this business. I believe in you two. I'm in." And so he partnered with us, and that began, you know, this journey where for the next probably six months, Vahe and I didn't sleep to build, you know, kind of enough where we could successfully take him live. He goes live on our software. It runs his whole business, right? Everything. Marketing, scheduling, dispatching, inventory, payroll, integration with financial systems. Like, everyone in his business uses ServiceTitan, and almost exclusively ServiceTitan, to do everything in the business. And so this is very mission critical stuff, and every day, Vi and I wake up at 5:00 AM. We drive over to John's office, and we fix all the problems that are being discovered real-time. And this continues for another six months, every day keeping our fingers crossed, hoping that John doesn't just, like, bust in through the door and say, "You two, take your crappy software and get the heck outta here." Thankfully, he never did that. He, uh, he had the, the patience and the courage to stick with it, and, uh, in the end we fixed all the issues. Software became extremely, extremely valuable to him, and ...

   4. HSHarry Stebbings14:20

      Do you think that would be the same?

   5. AMAra Mahdessian14:22

      I highly doubt it. Anytime you're doing something new, going up market, going down market, building a new product, going into a new customer segment, you know, you're going from, you know, residential to commercial, or you're going from, I don't know, plumbing to roofing. I think the person leading the charge needs to be a maniac w- on a mission. Most businesses, uh, that have successfully done that kind of entry, it has typically been founder-led. Now, in some businesses, you know, they have extraordinary talent and there's some extraordinary star that has helped make that entry. But in most businesses that I've heard of, it's, it's been founder-led, and, you know, the, the feedback loops are much faster. The agility is much faster, and when, you know, the CEO or the founder themselves build that kinda conviction, uh, in a market, in a product, of course the organization is able to invest much more aggressively, um, in getting it done.

   6. HSHarry Stebbings15:24

      Ara, I, I like you so much. Can you see my face is a little bit swollen here?

   7. AMAra Mahdessian15:29

      Yeah. Yeah.

   8. HSHarry Stebbings15:31

      Do you know why? It's 'cause on Monday I had my wisdom teeth out, and we had our show. And I said to the dentist, "Don't give me anesthetic. If I have anesthetic, it's gonna be numb. And if it's numb, I'm gonna need to reschedule 'cause I won't be able to talk." And he said, "Dude, you cannot have your wisdom teeth out without anesthetic." And I said, "Fucking try me." And he fucking ripped my wisdom teeth out too, without anesthetic. (laughs)

   9. AMAra Mahdessian16:00

      Why?

   10. HSHarry Stebbings16:01

       And I, I just thought of that when you said about the maniac. I was like, "Yep." (laughs) By the way, don't do that. For anyone listening, do not do that. (laughs) It hurt a lot.

5. 16:11 – 23:32

   Key Lessons for Going Upmarket

   1. HSHarry Stebbings16:11

      Um, but no, I think that's so interesting to hear. I'm so glad you said about kind of the going up market there, because it was one of my core questions, which is, you know, you started in the ... I, I don't know whether you call it kind of the mid-market. Nope. The four to 40 segment, in terms of technicians, before moving up market. What are your biggest lessons in terms of moving up market successfully, and what it takes?

   2. AMAra Mahdessian16:36

      The first would be what I just said. Doing anything new in a business, I believe, needs to be, you know, you need a maniac on a mission to lead the charge. The second I would say is, any time you're going into a new customer segment, in this case up market, uh, you gotta realize that there are new and different customer needs that need to be discovered, you know, really well and really quickly and solve for business buying decisions. So this applies to all B2B software. It's ultimately all about ROI. The only reason a business spends any money on anything is because there is this expectation of, "I am going to get some very significant return in exchange for some, you know, significantly less, but still meaningful investment." Anything that we do, um, with regards to building product, all of it, the, the whole thesis is that here is gonna be the ROI case for the customer. And that ROI is driven by the ability to, you know, improve their marketing by, you know, 6%, or improve their cr- selling close rate by 8%, or improve their average ticket by 4%, or whatever these things are. And we build the necessary product and the capabilities to drive those improvements to then drive the ROI.

   3. HSHarry Stebbings18:02

      To what extent is product marketing success ROI driven? You will get 80% more leads. You will save 70% of the dollars.

   4. AMAra Mahdessian18:10

      Completely.

   5. HSHarry Stebbings18:11

      Versus, versus a story?'Cause what we're told is that people buy a story. They buy resonance. And, like, actually everyone sells data, and everyone sells ROI. And it's just not that exciting when every lead generator says, "We'll generate three times more leads. We'll do X." So what? Sell me a story.

   6. AMAra Mahdessian18:35

      In our pitch, we lead with our founding story. There's a lot more credibility that it establishes, I think, behind anything we say following that. But the rest of the quote unquote "pitch," the product demonstration, is all ROI. It- it literally starts with something like, for example, "Harry, how many technicians do you have? Great. 10? Okay. What is their close rate on their visits? What is their average ticket? Okay, you have a 50% close rate. Your average ticket..." I'm gonna make this up. "Your average ticket is $1,000. Our other customers have a 60% close rate, and a $1,400 average ticket. And so if you are making, for example, four million dollars a year in revenue, if we could help you get from 50-60%, and from a thousand to 1,400, you know, we'll help you turn that three million year revenue to four-and-a-half million in, in revenue. And that means, you know, you're- you're gonna take on an incremental, you know, for example, 200,000 at the end of the year in profit. How does that sound to you?" Right? And then the customer, of course, says, "Wow, that's life-changing." Now, our ROI is often even higher than that, or at least, you know, w- what we propose to customers. And so then they want the product, and now they wanna understand how the product works.

   7. HSHarry Stebbings19:52

      How did you think about pricing? 'Cause it, when you can move the needle for a business by a million dollars, two million dollars, like a take on that would be optimal. How do you think about take versus per-seat pricing, and customers' willingness to have a take model?

   8. AMAra Mahdessian20:09

      In any product that we are building, we always envision the ROI case of roughly how much ROI do we think this can generate for the customer. And then depending on confidence rate in that ROI, we will then determine what percentage of that ROI we think, you know, should be our fair share. And we're very transparent with customers about this. You know, this is the ROI case behind the product we are pitching you and what you are signing up for. By the way, we are signing up for that ROI case, 'cause our only job is to make sure you see that ROI. And we tell 'em. If we make sure you see that ROI, you will renew, you will never cancel, you will refer customers to us. And it will give you conviction to buy all of our other pro-products. And so this is all we're fixated on. We're gonna help you get that ROI, because then we're gonna get all these financial benefits in return. And then we work with them to make sure they see that ROI.

   9. HSHarry Stebbings21:04

      What's your biggest advice to founders listening on successfully moving up in that way?

   10. AMAra Mahdessian21:08

       It's really hard to do. Very few software companies have successfully gone from downmarket to upmarket. And very few have gone from upmarket to downmarket. So it is just very hard to do. You have to have very high product velocity to quickly build the incremental needs to go upmarket.

   11. HSHarry Stebbings21:30

       D- what did you do to have that product velocity?

   12. AMAra Mahdessian21:33

       What really helps is that Vahe and I are both engineers.

   13. HSHarry Stebbings21:36

       Mm-hmm.

   14. AMAra Mahdessian21:37

       That really helps in a business, because then as founders, you know roughly how long anything should take to get built. And so when you are contemplating what to build, okay, 'cause th- there could be a, you know, 10 different ways of solving any problem, and there could be 10 different problems you wanna prioritize. You can quickly do the math on this problem will be, for example, high value, but incredibly hard to build. This other problem will be roughly the same amount of value, but much faster to solve. And in exploring the options for solving the problem, you can quickly figure out which one, like, is relatively quick to build, um, but also is good enough as a long-term solution, or which one is, like, the perfect long-term solution. And so you can do this math really quickly and decide, these are the problems we're gonna solve, versus the others, and here's how we're gonna solve 'em. Now, of course, when you're small and you're making all the decisions, that works really well. As you get bigger, and then, of course, you have a leader under you and you have great teams, um, they make the decisions, but you are able to add value in that conversation. And, you know, w- when you know a particular domain, you are able to hire much better leaders. So, you know, we're incredibly thrilled with our CTO today, and I- I think, you know, when you're talking to a hundred different CTO candidates, it's very hard to figure out who's, like, the best. Um, but I do think because Vahe and I are both engineers, it allows us to, you know, hire better people.

   15. HSHarry Stebbings23:08

       You mentioned kind of that, that, that going upmarket and, you know, when we look at the product suite that One has to choose from, you're a very pre- you're a very premium option. I think your... I think my team, which are pretty rigorous in terms of diligence, found out that you're three times the price of competitors.

   16. AMAra Mahdessian23:24

       Yeah, easy.

   17. HSHarry Stebbings23:24

       You're gonna say that's bullshit.

   18. AMAra Mahdessian23:26

       Easy.

   19. HSHarry Stebbings23:28

       Okay.

   20. NANarrator23:28

       (laughs)

   21. HSHarry Stebbings23:28

       Easy. How important-

   22. AMAra Mahdessian23:29

       We're paying better even, even more than that, potentially.

6. 23:32 – 31:33

   Building a Premium Brand

   1. AMAra Mahdessian23:32

   2. HSHarry Stebbings23:32

      How important is it to be viewed as the premium option? And what is your biggest lesson to founders, who are the most expensive in a similar way?

   3. AMAra Mahdessian23:41

      You can't just choose to be premium. Y- you can become the premium product by delivering something that is incredibly valuable. We didn't choose to be premium. What we chose is we wanna make this buying decision of buying ServiceTitan such a no-brainer. And the way to do that is to make sure it imparts unconscionable amounts of ROI and value. When you build that much ROI into a product, where it can make this, like, life-changing difference in a contracting business, you then automatically earn the label of premium. But it has to be commensurate with the value.You know, w- we're not a clothing brand that just by putting, you know, by sourcing cheap materials but putting a shiny logo on it we can pretend we're premium. There has to be real quality and ROI behind everything we build to, to earn the premium tag.

   4. HSHarry Stebbings24:34

      My question to you is, you mentioned the word brand there. I'm really interested in taking that back to Jason Lampkin earlier. Jason Lampkin says, "The beauty of vertical SaaS is the ability to build micro-brands much earlier than people think." When did you start to see a micro-brand emerge for ServiceTitan?

   5. AMAra Mahdessian24:51

      What does he mean exactly by micro-brand?

   6. HSHarry Stebbings24:53

      A micro-brand, he means where customers go, "Oh, I've heard of ServiceTitan. Yeah."

   7. AMAra Mahdessian24:58

      I see.

   8. HSHarry Stebbings24:59

      "Let's chat." Where there's a naming resonance where you're not going, "Oh, let me tell you what we do," but because of the community, people know, their friends use it-

   9. AMAra Mahdessian25:08

      Yeah.

   10. HSHarry Stebbings25:08

       ... and they're much more willing to engage.

   11. AMAra Mahdessian25:10

       I'm not a marketer, but I- I've spent quite some time thinking about branding and so I'll, I'll share what I've thought about. In vertical software, especially I think in contracting, it's a very tight-knit community. Every contractor knows every other contractor, and what's really weird is like, I- I think because contractors have been so underserved by everyone else, as a result they are so willing to help one another out, even direct competitors. A plumbing contractor, of course, knows a bunch of HVAC and electrical contractors 'cause they have to refer work to one another, but even a plumbing contractor in LA will happily open their doors to another plumbing contractor who's struggling and invite them in and teach them everything they know about the business and help them become successful. Uh, I think there's a lot of, like, empathy and sympathy for the fellow contractor. And because of this, word spreads really quickly about any product or service that is beneficial and high ROI, everybody will find out about quickly, and anything that is, like, snake oil, everybody will find out about really quickly and, you know, that business will go out of business very quickly. And so, you know, brand is ultimately the feeling customers get, okay? It's the feeling that they have about your company based on all the interactions that they've had with your company. And those interactions can be by virtue of using your product, by virtue of calling, you know, technical support, by virtue of talking to a customer success manager, by virtue of interacting with your, you know, online materials, et cetera. I think what we did very organically but very fortunately is because of our maniacal fixation on making sure contractors were successful in our product, the brand that resulted, the feeling that resulted about ServiceTitan is that ServiceTitan represents success for a contractor, and by using ServiceTitan you'll be more successful, but coincidentally, like, you know, there's a big community around ServiceTitan. There's a, you know, uh, online group with like 10,000 contrac- contractors on it, and I got... I see the posts in there and I even see things like somebody posting, "Mom, I made it. I'm on ServiceTitan." Like, it has become this thing that to be on ServiceTitan is an indicator of success, which is... like, brings me so much pride, um, that we have earned that kind of validation from customers.

   12. HSHarry Stebbings27:48

       When you ............................ on brand, did you see that have an impact on customer acquisition cost? Because there's the idea, as you said, everyone knows everyone, they all talk. Did you see, "Huh, we don't need to spend on marketing because everyone just talks"?

   13. AMAra Mahdessian28:01

       Absolutely. There's a very significant impact on customer acquisition cost and the effi- efficiency to go to market motion, both in surfacing pipeline, you know, getting a lot of inbound inquiries as a result, both through like direct referrals and just so much word of mouth that ultimately when a contractor is thinking about software they decide to take a look at ServiceTitan. But then of course in things like close rates. You know, when there's high conviction in a product because you've heard so many good things, your close rates go up, but then also the willingness to pay, the ARPU goes up, and then the willingness to buy pro-products goes up. People often ask me, you know, "Why is customer success so important?" For me, there are two reasons. The first has nothing to do with, like, financials. This business is very personal to me. Um, I like to think, like, I'm a man of my word and if I give my commitment to someone, you know, I will move the world to honor it. And so when these hardworking salt-of-the-earth contractors who have built, yeah, great companies and it's their livelihood and their name is on the door, their legacy is on the line, their families are on the line, man, I will do anything to make sure I deliver on my word and my commitment and make them successful. There's always, um, a small but still meaningful chance that something can go wrong. Like even in those cases where it does, I don't care if it's my fault, my team's fault, the customer's fault because, you know, they weren't committed, they didn't prioritize it, they... It doesn't matter. Like, to us there's a concept of extreme ownership. We have to make them successful and so we will do everything it takes to make them successful. So that's like the, the personal reason why it's so important to me. After having done this for now over a decade, what I have seen is that the financial rewards of doing this are so high. It is why we get so many inbound leads, it is why our close rates are so high, it is why, going back to your point, why are we, you said, you know, 3X or whatever X more expensive than competitors? Why do customers then trust us to buy pro-products? You know, why do we get pulled into new markets as a result? It is because of this fixation on making sure the customer sees ROI which we call quote unquote customer success.

   14. HSHarry Stebbings30:20

       Does that mean you have a higher budget for CS than other teams?

   15. AMAra Mahdessian30:24

       Yes.... but it, it doesn't cost all that much. It's not like we're profligate in our spending or our investment in customer success. Maybe we invest a little bit more. But, yeah, the c- customer success, by the way, doesn't happen just from customer success teams. There's only so much a customer success manager can do if the product isn't good enough. Like, how many workarounds is a CSM gonna advise each customer on if the product doesn't solve the workflow needs, or even if the product solves all the workflows but those workflows are just workflows that don't have ROI associated with them? There's nothing a CSM could do to generate ROI. This idea of customer success, of course, is very significantly influenced by CSMs, but it is equally, if not frankly, much more significantly impacted by the product itself. You have to be in an industry where there's an opportunity to generate, like, incredible levels of ROI, and the product has to be built in a way to make that happen. If those two things aren't there, CSMs can't do anything about

7. 31:33 – 34:01

   Timing for Launching Second & Third Products

   1. AMAra Mahdessian31:33

      it.

   2. HSHarry Stebbings31:33

      There comes a time when you saturate the core market a little bit, and when you are unable to sustain the growth levels that you need with just one product. What are your biggest le- you've mentioned pro products before in this call. What are your biggest lessons on when's the right time to do second and third products?

   3. AMAra Mahdessian31:51

      As soon as the product you are currently building has great product-market fit, you have a high degree of success with customers that buy your current product, then I think y- you should absolutely, you know, entertain the idea of building the next product. Um, but the opportunity has to be there. Many companies have tried to be a multi-product company, and either in the new category that they're thinking about there's already a great competitor, um, that is hard.

   4. HSHarry Stebbings32:21

      Is that not too early? If you think product-market fit is hard, g- running go-to-market sufficiently is hard, CSMs are hard. Like, fuck, when you have product-market fit, just double down. Make sure that the train runs fast, fast, fast. If I say, "Hey, Ara, let's do a second product," you're like, "What? W- well, we need to do, like, go-to-market super well for this product that's selling super well, and the CSMs are inundated because we have, you know, a lot of people now buying a second product."

   5. AMAra Mahdessian32:49

      None of these moments are, like, binary. It's y- you start with some level of investment in the second product, and then as you get traction, the investment level increases, and the same with your first product. So, would I wait until I have product-market fit on the first product, go-to-market is, like, perfect, implementation is perfect, everything is perfect before starting to build the second product? I, I would risk being really late by doing that. Once we have product-market fit, a- and for me, product-market fit, like, means you are really... The only way you can have real product-market fit is if you're really good at understanding the purchasing process and the ROI case, and you have built the right product to support that ROI case. And if you have that, it means your pitch is good, which means you should have good close rates and ARPU. So, it won't be perfect, but it's hard for me to imagine how you have product-market fit, like, without doing a good job marketing and selling the product. Th- those two things are so

8. 34:01 – 36:37

   ServiceTitan's Delayed Product Release

   1. AMAra Mahdessian34:01

      correlated.

   2. HSHarry Stebbings34:02

      One of the killer products that you did launch, uh, is, like, the payments products and the financial products.

   3. AMAra Mahdessian34:08

      Yeah.

   4. HSHarry Stebbings34:08

      This is, like, the hottest thing in SaaS, as you know, adding financial services to a SaaS business. But it took you 10 years and 1,000 customers according to the team's research. Why did it take so long, and should you have done it earlier?

   5. AMAra Mahdessian34:23

      Yeah, I would say that was an example of us not seeing the opportunity to build a great payment solution, and we should have done it earlier. Um, w- we had good product-market fit. Now, the, the problem with our, um, use case is that our product is so wide, so deep. 100% product-market fit across the entire spectrum is, is very hard and takes a very long time to achieve. Like, the, the vast majority of the product had great product-market fit, and we should have started the payments journey earlier. We absolutely should have.

   6. HSHarry Stebbings35:02

      Is there anything else you should have done earlier?

   7. AMAra Mahdessian35:04

      Expanding into a new customer segment, like going up market, down market, going residential to commercial, going into a new trade. M- most of those, I think we got the timing right. When we're being pulled into those markets, it a lot, it's a lot easier than trying to brute force into those markets. You know, we got pulled into garage door by a customer. We got pulled into roofing. We got pulled into commercial. So, I think the, the timing was right on those. On the product front, payments we should have done earlier. Maybe, you know, w- one of the products we did too early, but the, the new contact center product, th- this is the perfect time.

   8. HSHarry Stebbings35:42

      Do you think you're a good CEO now?

   9. AMAra Mahdessian35:45

      There's a lot that I can do better. One of the things I've, that has evolved a lot recently is, like, I, I tend to demand a lot, uh, of the people around me because I believe nobody knows the limits of our own potential. And I believe that the, the people around me are so gifted and can drive such impact that I wanna help them realize that manifestation of themselves. Previously, I would, I would doing it, yeah, the only way I knew, which was just demanding as much as I could. What I've since realized is what is both more, like, effective and doing my best to...... inspire them to achieve

9. 36:37 – 41:26

   Inspiring Without Fear in a High-Demand Culture

   1. AMAra Mahdessian36:37

      greatness.

   2. HSHarry Stebbings36:37

      Help me here, because, like, I'm very, very demanding. We just joked about, like, my intensity. I'm very demanding.

   3. AMAra Mahdessian36:43

      Yeah.

   4. HSHarry Stebbings36:43

      And do you know what it's led to, honestly, Are? It's created a culture of fear. People are s- like, genuinely scared, which I don't want. That makes me feel shit. How do I create that high-intensity inspiration environment without having fear?

   5. AMAra Mahdessian36:59

      So, I'll, I'll give you an example from literally yesterday. I was on a meeting with a pr- one of my product teams working on a new product that we're launching, and things are going really well, it's a amazing product. And we're gonna launch it at our upcoming user conference, Pantheon. And so at the end of the great meeting, I asked the team, I'm like, "So, like, we are ready to launch this at Pantheon, right?" They're like, "Yep, absolutely." I'm like, "It's gonna be stellar quality, right? Like, I want Apple-level quality." And they're like, "The quality's gonna be great. Um, but of course, the quality will get better over time." You a- you know, then they said like, "All right, you asked us to get this launched by Pantheon." And the prior version of me woulda probably said something on the order of, "Hey, that's not good enough. We can't just launch on time. The quality has to be A-plus. We're not gonna sacrifice quality just to get something launched on time, and you must do better," et cetera, et cetera. And organically, what I found myself saying is like, "Team, I understand we wanna launch on time and with great quality. If I just wanted to launch anything on time without regard for quality, I woulda brought in the B team, the C team, the may- maybe even the D team. Anybody can launch anything on time without any regard to quality. But I brought in the A team, right? This is the A team, right?" Then everybody, like the reaction was smiles everywhere, happiness everywhere. And people rallying, being like, "You got it. You bet. We're gonna launch this on time, and it's gonna be A-plus quality. This product's gonna kill it," et cetera, et cetera. I think you can drive an even better effect and an even better outcome, and like you said, m- feel a whole lot better about yourself. And the people around you will feel a whole lot better about themselves if you demand excellence through inspiration over, like, harsh words.

   6. HSHarry Stebbings39:05

      Are- are you a perfectionist?

   7. AMAra Mahdessian39:07

      In the things that are important to me, yes. Yeah. Perfectionist about product, about, like, metrics and driving the business by metrics. Profess- perfectionist about, uh, you mentioned the, the Loro Piana comment, the, about fashion in, in certain ways, about soccer and how I coach the kids' soccer team. Yeah, the, the things that are really important to me, perfectionist.

   8. HSHarry Stebbings39:35

      You sound like a bit of a micromanager. Pause, pause, pause.

   9. AMAra Mahdessian39:39

      Sure, sure.

   10. HSHarry Stebbings39:40

       Jensen Huang is also. You know, Jensen Huang has 61 direct reports, or 62 or whatever it is. Is micromanagement bad, and do you think that's a fair summarization?

   11. AMAra Mahdessian39:52

       It, it depends on the definition of micromanagement. It depends on what qualifies as micromanagement. For example, if micromanagement is I, as the CEO, make all the decisions, yeah, it's terrible. (laughs) That means either I have an incredible team around me, and I'm a complete idiot and have no idea how to give them the autonomy to make a whole bunch of great decisions, 'cause I can only make a finite number of, of decisions in any time period. Um, or it means the team around me is not good. Uh, in which case, I'm a terrible leader for hiring, building, and coaching a poor team. My job is to make sure I have a great team around me. So in both cases, I would have failed. Um, but if by micromanager we mean I hire people who are much better experts than myself in their domains, yet I am engaged, and I talk to them to understand what their priorities are to make sure their priorities are linked to the company priorities, and I understand how, what their plan is for executing these priorities, and from time to time I can offer them, you know, an opinion that turns out to be a really good insight for how to get better outcomes, like, th- that to me is at least my idea of what good leaders do. I do not believe in micromanagement where the leaders make all the decisions, but I also don't believe in pass-through leadership.

10. 41:26 – 45:17

    The Core Pillars of Great Leadership

    1. AMAra Mahdessian41:26

    2. HSHarry Stebbings41:26

       Do you agree that leadership is about, great leadership is about one or two big decisions a year, or the many thousand that you make that are very small every day and every month?

    3. AMAra Mahdessian41:37

       Great leadership is about generating great outcomes, extraordinary outcomes. Ultimately, that's what it comes down to. Okay? Now, in order to generate extraordinary outcomes, you most likely will make one, maybe two big decisions on, quote-unquote, "where to play." Okay? And that where to play could be we're going upmarket, or we're going downmarket. Could be we're going roofing or we're going plumbing. Or it could be we're building a contact center product versus we're building the online scheduling product. Now, to successfully pull... So great leadership is about one thing, deliver extraordinary outcomes. That typically involves one decision about where to play. Successfully executing where to play involves hundreds of great decisions on execution.

    4. HSHarry Stebbings42:33

       The biggest strategic mistake that I made was I waited six years to go to video.I thought that, actually, people felt much less comfortable on video. I felt that they would close up more, and we didn't do YouTube for six years as a result. That was an incredibly ... We have millions of subscribers, which I'm very grateful for, but not on video. And that was a costly mistake for me, which we've corrected and we've done it for years now. What was the most costly strategic mistake that you made as a leader?

    5. AMAra Mahdessian43:03

       Anytime you make a poor leadership hire, it is very costly for the business. Because the impact scales not just down throughout the entire organization that person leads, but it also starts to creep in laterally to all the other organization, and it can really threaten the functioning of a, of a company. And so, the, the lesson that we have learned from that is, I- in the past where I've ... W- you know, experience is very important, but in the past where we have kinda fixated only on experience, we have run the risk of hiring people who may have lived in these footsteps but, like, don't carry the same DNA of being a team player and, you know, not just operating from an ivory tower, and being very involved in, in the trenches.

    6. HSHarry Stebbings43:51

       How quickly do you know?

    7. AMAra Mahdessian43:53

       You get the feeling immediately, like w- within weeks. The challenge is acting, uh, and not hesitating always takes, at least for me, uh, in the past, took months. And that is where the da- damage is done. Uh, and so what I've learned from that is that in every case I can recall now, in every case where there was doubt about an individual, that doubt has every single time proven to be justified, and it turned out that that person was the wrong hire. It has never happened where, given an extra six months, nine months, there's been some transformational turnaround where I've said, "Wow, I was really wrong about that person." And so now the philosophy is, when there is doubt, there is enough conviction.

    8. HSHarry Stebbings44:49

       The hard thing I find is you know very quickly.

    9. AMAra Mahdessian44:52

       Yeah.

    10. HSHarry Stebbings44:52

        But to cut someone, especially a key exec hire, after two weeks or three weeks, it's so harsh. You've gotta at least look like you've given it more of a go.

    11. AMAra Mahdessian45:02

        Yeah.

    12. HSHarry Stebbings45:04

        Do you know what I mean?

    13. AMAra Mahdessian45:05

        As you said, you gotta look like you gave them a chance. Probably 100% of the time, you're gonna end up having given too much time. If there is doubt, there's enough conviction.

11. 45:17 – 48:03

    How Football Impacts Ara's Leadership Style

    1. HSHarry Stebbings45:18

       So final one before we do a quick fire, but I, you know, we've got many mutual friends and all of them told me that you fricking love football.

    2. AMAra Mahdessian45:25

       Yeah.

    3. HSHarry Stebbings45:25

       Not soccer. Football, Ara. How does football impact your leadership style or show up in your leadership style?

    4. AMAra Mahdessian45:33

       There's a lot in common between how I think about ServiceTitan and how I think about, for example, football. Like, I, I am ... I want to achieve extraordinary things. I want to make an extraordinary impact, both in ser- at ServiceTitan, you know, when I play football, or when I coach my kid's football team. Football, I see as, like, the most intellectually challenging sport there is, or at least the ones I'm aware of. Most people just see the flashy dribbles and assume that is what makes a great player, and it turns out it's, like, the complete opposite of all that. Football is very technical, but it is incredibly tactical. And y- you have to be a student of the sport to appreciate the tactical beauty. You know, more than half the runs you see are like dummy runs. The runs are just designed to drag a defender out of position to create space for a teammate to run into. At least the football that I teach is a, a lot about things like, you know, doing rotations to create overloads in certain parts of the pitch. That is complete tactics to outnumber the opponent by, by doing those rotations. So I, I pursue football with, you know, kind of the similar philosophy as I pursue business. Of course I wanna win, the competitor part of me wants to win, but it's more than just winning. It's more than just being better than competitors. I want to improve all the time in business and in football, to get closer and closer to perfection. So when I coach the, the kids team, it's ... Winning is nice, but for me it's not the winning. I want them to play in the most beautiful way possible.

    5. HSHarry Stebbings47:21

       Will the MLS sustain post-Messi?

    6. AMAra Mahdessian47:24

       Certainly right now it's all the rage with Messi here. The stadiums are filled, everybody's buying merchandise. Uh, but still, you know, most real football fans here don't watch MLS. They, they watch European football. They watch their Premier League teams, their La Liga teams, their Serie A teams, they watch Champions League. Real football community doesn't really watch ML- I, I don't watch MLS matches. None of my friends do. The coaches I coach with don't. The players don't. But for, like, the, those that are kinda new to the sport, I s- I suspect there's significant viewership and ... But it'll probably take a hit after

12. 48:03 – 54:42

    Quick-Fire Round

    1. AMAra Mahdessian48:03

       Messi.

    2. HSHarry Stebbings48:03

       Ara, I'm gonna do a quick fire with you. So I'm gonna say a short statement and you're gonna give me your immediate thoughts. Does that sound okay?

    3. AMAra Mahdessian48:09

       Yeah. I, I'm not good at this quick fire stuff, but I'll do my best.

    4. HSHarry Stebbings48:13

       What do you believe that most around you disbelieve?

    5. AMAra Mahdessian48:16

       The importance of customer success.

    6. HSHarry Stebbings48:18

       Who's the best board member you would most like to have but don't have?

    7. AMAra Mahdessian48:22

       There's a lot of people who have lived this journey before, you know, f- for example, Tui or Toby at Shopify or, you know, Chris from Toast who, who are so relevant to what we do in vertical SaaS. But then, of course, you know, like, people like Satya or e- et cetera who I could learn so much from. Th- there's a ton of people.

    8. HSHarry Stebbings48:42

       What have you changed your mind on in the last 12 months?

    9. AMAra Mahdessian48:45

       Where do you come up with these, man?

    10. HSHarry Stebbings48:49

        (laughs) Dude, I've done 2,700 interviews over 10 years.

    11. AMAra Mahdessian48:54

        Aris. I don't know.

    12. HSHarry Stebbings48:57

        No one... No, all founders are like, "Oh, I don't like VCs." Uh, "I spend too much time with VCs."

    13. AMAra Mahdessian49:02

        (laughs)

    14. HSHarry Stebbings49:02

        I'm like, "I've done, I'm like, I've done 2,100. Try me." (laughs) Is Venture what you thought it would be?

    15. AMAra Mahdessian49:10

        It has turned out to be way better than the, the scary tales that I had in my mind. Every firm that we partner with, they've been authentic, very much invested in our success, aligned with how we wanna build a business that is both incredibly successful financially, and the right way to build a business. And so helpful in the journey.

    16. HSHarry Stebbings49:34

        What do you know now that you wish you'd known when you started ServiceTitan?

    17. AMAra Mahdessian49:37

        (laughs) I'm almost glad, uh, I didn't know how hard it would be. 'Cause there's a good chance I may not have done it and then I'd really regret it. Now, now all, it's all sunk cost. Now, I, I don't mind. But if that was ahead of me, it's like getting your wisdom teeth pulled out every day.

    18. HSHarry Stebbings49:55

        I think that's called marriage, but sure. Um-

    19. AMAra Mahdessian49:58

        (laughs)

    20. HSHarry Stebbings49:58

        (laughs) Uh, okay. You can call yourself up the night before your first child and say, "Aris, you should know this." What would you tell yourself?

    21. AMAra Mahdessian50:08

        This too, parenthood, is also incredibly hard, but I had no idea it would be this rewarding. You know, I'm, um, very family-oriented and I always wanted to have kids and many kids. And, but even I couldn't imagine how rewarding it is to be able to cuddle with your kids and share the love, but also teach them, teach them about principles in life, teach them about friendship, teach them about, I don't know, math or science, teach them about football. And to see them learn, and you get to do this every day, and you get that feedback loop every day of, like, them developing and growing, uh, and also you making an impact in their lives is the most rewarding thing I've ever done.

    22. HSHarry Stebbings50:56

        Do you believe in work/life balance?

    23. AMAra Mahdessian50:58

        Even if I did, it's so h- so hard to even come close to that. I, I really like what I do. So because I like what I do, it's part of my work and it's a part of my life. It's just important that I'm also there for, like, my wife and kids, um, for the important moments. And yeah, we, we make it work. It's, it's hard, but it's not impossible.

    24. HSHarry Stebbings51:21

        Penultimate one. This is a magic wand, okay? And you can get better with any aspect of leadership. What aspect would you most like to improve on with this magic wand?

    25. AMAra Mahdessian51:33

        If I could be even better at, like, assessing the real capability of a potential hire. That is so hard to do during an interview process, and of course we invest a lot of time and effort to get, like, some level of, of a good percentage hit rate. But if I can magically be 100%, awesome.

    26. HSHarry Stebbings51:56

        It's the hardest thing, my friend. Aaron Levie said, you know, "If you do hiring well, you get one out of two right."

    27. AMAra Mahdessian52:02

        Yeah. So if I can get two out of two, it'd be life-changing, company-changing.

    28. HSHarry Stebbings52:07

        (laughs) Final one for you. You don't do many interviews, but people ask you a lot of questions. What question does no one ask you that people should ask you more?

    29. AMAra Mahdessian52:18

        Have you psychoanalyzed yourself to figure out what really motivates you? That, I find to be one of the most fascinating topics, is understanding why people do or behave the way they do, or make the decisions they make. And so-

    30. HSHarry Stebbings52:33

        Have you done that on yourself?

Episode duration: 54:42