The Biggest Mistake in My 25-Year Journey Building Unicorn Startup | Godard Abel, G2

1. 0:00 – 2:15

   Intro

   1. SPSpeaker0:00

      I think the most difficult thing for me as an entrepreneur is letting people go. The first year of funding, we scaled to 70 people. Then we had to cut down to 20, and that was over three rounds of layoffs, and I think those were always my worst days as an entrepreneur. Probably the thing I remember most is even just having to let one person go. First time I had to fire someone. And it's probably made me more prudent as an entrepreneur, but it still felt so hard, you know, to, like, let someone go, look them in the eye, let them know they're not gonna have a job anymore. I just ... It felt horrible. And so that was a very painful shift, but then in hindsight, that's also when we learned the most 'cause then we just said, I just said, "Hey, I just gotta focus on the customer. Just win the next deal, make the next customer happy. And if we do that fast enough and we generate enough revenue, we'll be profitable." And we actually then pulled that off, where within a year we were able to get profitable. And it really took until 2007, seven years into the company, till we really found product market fit. Now, and it's still hard and challenging, but I think now I feel like I have more perspective. Like, one, I'm really choosing to do it. I love building companies. I've realized that. And I love the challenge. And even when we have the lows, and we still have them, you know, you lose a customer, you lose a deal, you lose an employee, it still feels really terrible, but then I also know that, you know, for every low there's a high. You know, you win a new deal, you recruit somebody amazing, you get to a liquidity event. And then I've kind of realized that the highs don't come without the lows. People talk about the intellectual side of startups, but I honestly think what makes a great entrepreneur is the emotional fortitude and the ability to continue to persevere through the really tough moments. Letting people go, losing deals, losing people, losing customers. I think when you can persevere through those moments, those are the entrepreneurs that, that have success. Hi, I'm Godard Abel, co-founder and CEO of G2, and we're building the trusted place you go for software. We have about 100 million software buyers coming to G2 every year to discover the best software for their business. We have over 3,600 customers, and these are software vendors around the world. And we have achieved over 100 million in revenue run right now. And we did become also a unicorn in 2021, so we've raised over $250 million. And now we have established ourselves as the leading number one software review site in the world. [gentle music]

2. 2:15 – 5:35

   The Deep Valley: Seven Years of Pain Before the Breakthrough

   1. SPSpeaker2:18

      Well, I think this goes back to before I was at McKinsey. I studied at MIT. You know, so I was an engineer. And I remember even when I was at MIT, my best friend at the time, Chris Schutz, he and I thought about starting a company all the way back right out of MIT, and we were already working on 3D printing, and we were about to start a company, but then we both kinda got scared. You know, we thought we weren't quite ready. So I decided to get some real-world experience first. You know, I went to work for McKinsey. Chris went to work as an engineer. And I first got involved in startups way back in 1998, and that was an exciting time. I was at Stanford Business School out in the Silicon Valley in Palo Alto. It was the first internet boom. Companies like Google were getting started. And I started helping two Stanford computer science students, and they were building a company called Alianza, and they really just needed a business person to help them. You know, they were both programmers. And, uh, I was excited about entrepreneurship, so I started helping them. And we wound up selling that startup quickly to a bigger startup, Niku, that went public. I remember in March 2000, I think with a $10 billion valuation. And the entrepreneur there, Farzad Dibachi, he also inspired me. He'd worked for Larry Ellison, the founder of Oracle. And I watched and helped Farzad build his company, and I thought, "Wow, this would be a great time to start my own company." And so I started Big Machines at the beginning of 2000 to really help companies like my father's. My father was in pump manufacturing and helped him. The vision for Big Machines was he made very big pumps, and the vision for Big Machines was to help him sell his pumps online, much the way Dell was selling PCs online. And so that was when we, you know, started building our first company all the way back in 2000. And my first company, Big Machines, as I mentioned, I started this in 2000 dot-com era. I was a 27-year-old cocky kid. I remember one of my first investors was John Sculley. You have to be old to remember him, but he's sort of infamous. If you watch, like, the movies about Apple, he's the guy that fired Steve Jobs. He was my first investor, and then once I had him invest, everyone... He... And his advice to me was just, like, "Just think about how to go public in one year." And I was like, "That sounds awesome." But we were also lucky at that time the internet was still brand new, so the first year we were able to raise $20 million from investors because nobody knew the internet and nobody knew how to sell online. So investors were willing to take a chance on, you know, kind of young, inexperienced entrepreneurs. So we got going very quickly. So the first year was actually exciting. We went from, like, just the two of us to 70 people and, you know, raised a bunch of money. So that was, you know, we thought we were gonna maybe go public in a year or two. But then, like, it changed dramatically because in 2001 there was then a dot-com bust, and all of a sudden investors that were throwing money into internet companies, they completely stopped, and it was the opposite. And even Amazon was still very young at that time, and I remember Wall Street analysts were saying Amazon was gonna go bankrupt, and people were saying the internet was a fad. You know, maybe a little bit like what happened with crypto. First everyone was really excited, and then all of a sudden everyone thought, "Oh, wow, it's a bad idea." And that was really hard for us because then our customers, also manufacturers, got very skeptical. They all said, "Oh, we don't really need the internet. You know, we're fine sending catalogs to our customers, CD-ROMs." And so it was really, got really hard 'cause I remember in 2001, I think our business plan was to sign up 20 manufacturers, and then we were supposed to sign up 40 in 2002. And I think we actually only signed up two that year. Same thing happened in 2002. And by the time we got to 2003, we were almost bankrupt. You know, we'd burned through 19 of the 20 million we'd raised.

3. 5:35 – 7:31

   Biggest Early Mistake

   1. SPSpeaker5:35

      So I think a big lesson learned, one, we started spending it too fast, you know, before we had product-market fit. And I'd tried to hire two VPs of sales before we had product-market fit, and we really should have still been doing founder-led selling. And so it really led to a really difficult reset in 2003 because we were down to one million. We also knew we'd never be able to raise more money. We had to go to organic growth. It was really difficult, but we decided to scale the company down from 70 to 20 people, so we had to let a lot of people go. And we just said, "Hey, we have to get profitable, cash flow positive within a year." Otherwise, we're going out of business. I think the most difficult thing for me as an entrepreneur is letting people go. The first year of funding, we scaled to 70 people, then we had to cut down to 20, but it always feels really painful, and it's probably made me more prudent as an entrepreneur, you know, since I've had to do that. Well, one, ideally give yourself some buffer. You know, raise more capital so you can persevere longer without having to, to lay people off. And, and secondly, make sure you get productivity quickly so that everyone you hire ideally is producing, ultimately producing revenue. But it still felt so hard, you know, to, like, let someone go, look them in the eye, let them know they're not gonna have a job anymore. I just ... It felt horrible. And so that was a very painful shift, but then in hindsight, that's also when we learned the most 'cause then we just said, I just said, "Hey, I just gotta focus on the customer. Just win the next deal, make the next customer happy, and if we do that fast enough and we generate enough revenue, we'll be profitable." And we actually then pulled that off, where within a year we were able to get profitable. And then it really took until 2007, seven years into the company, till we really found product-market fit. And finally, our success came. We partnered with Salesforce as well as with Oracle for their CRM On Demand, and we became the leading quoting tool to complement those CRM tools. And as they started growing, we really started growing. So eventually the company was a big success. I think 13 years in, it was acquired by Oracle for $400 million. But it was only after many years of struggle and near failure. And I do love the book by Ben Horowitz, The Hard

4. 7:31 – 7:51

   What matters more than the intellectual side of a startup is emotional fortitude

   1. SPSpeaker7:31

      Thing About Hard Things. People talk about the intellectual side of startups, but I honestly think what makes a great entrepreneur is the emotional fortitude and the ability to continue to persevere through the really tough moments, letting people go, losing deals, losing people, losing customers. I think when you can persevere through those moments, those are the entrepreneurs that, that have success.

5. 7:51 – 10:27

   Turning Point: Finding PMF Takes Longer Than You Think

   1. SPSpeaker7:55

      True product-market fit, you know, where all of a sudden it felt like, wow, people really wanna buy this, right? Whereas the first six years, it was always just a struggle. Yeah, I think the first six years we always missed our sales plan. And I think for me, probably the big difference is all of a sudden, like 2007, we started getting inbound demand, and part of this was from the Salesforce ecosystem. But I remember Salesforce started moving upmarket. So I remember one of our first enterprise customers with Salesforce was Ricoh, you know, the big kind of copier printer company. And I remember Salesforce was competing with Siebel, an LCRM product. But I think the customer told them, "Hey, we will only buy Salesforce if you have a CPQ, a configure price quick quoting app." And then Salesforce brought us into the deal 'cause we already had the technology at Big Machines. And so all of a sudden we started getting this inbound demand from big companies, and they started buying. As you start getting inbound and the deals actually start converting faster than you expect, but that didn't happen for us, you know, all the way until 2007. You know, my co-founder, Chris, and I, we didn't wanna quit on each other. You know, we were best friends from MIT. We'd also recruited some of our friends, so I think that was one motivation. And the other motivation, we did have about a dozen early customers. They were having success using Big Machines' online quoting software. They were able to do quotes 80% faster, process orders online in real time. And so we thought eventually the broader market would see it, but we had those classic early adopters. And then if you follow the Geoffrey Moore Crossing the Chasm, you know, we were just kinda stuck in the chasm. But we had enough early adopters that were having success, so we also ... We didn't wanna let down our customers. And we thought eventually, you know, the market would get to the mainstream. And luckily that happened. You know, but it, it was hard those years. A lot of days it was very frustrating, and I think a lot of days I wanted to quit, you know, 'cause like it felt like this tremendous burden. Like, I felt like I was failing every day, you know, for almost six years, so it was really hard. But then in hindsight, I'm really glad we persevered, you know, because eventually the, the demand for the, the cloud software did come. I think number one, from my experience, don't quit. You know, and that was my experience. Usually it takes you longer to get to product-market fit, you know, than you think. But if you really believe in your vision and you have some early happy customers, then I'd just say don't quit because eventually we've always found the market does come. And I think most entrepreneurial journeys, they take longer. Like, I've never been like Mark Zuckerberg, you know, where he coded Facebook, and apparently everyone at Harvard used it overnight. And I think that's rare. I know a lot of entrepreneurs. For most entrepreneurs, it's a longer, it takes longer than they think. And so I think persevering to me is the number one key to having a success, you know, as a SaaS entrepreneur.

6. 10:27 – 17:47

   Building G2: If You Truly Believe in Your Idea, Don't Pivot

   1. SPSpeaker10:30

      Once we first got liquidity, it did feel great. You know, at first it kinda felt euphoric, but then we also had new investors. And honestly, then I realized I didn't really love working for them, so I had about a year break. And during that time, at first I was just tired. You know, I was burned out after 11 years of struggle. But then I remember a few months into it, my wife also, Stacy, she was like, "Hey, what's wrong with you?" You know, 'cause I wasn't happy. I'd made some money. Also, my friends didn't understand, but we bought, like, a bigger house, you know? And my friends that weren't in tech, they were like, "Oh, you should just be happy," right? Like, "You've made money. It's a success. You could retire." And I realized actually I missed it. You know, once I had enough of a break to recover and I'm like, "Wow, I really miss working with my team. I miss having that challenge every day. I miss building." And then I kinda, with that realization, went back. You know, we started G2. We started Steel Brick. And you know, we've been building new ventures ever since. And it was really the pain we felt when we were building Big Machines, and part of our pain was to get validation. You know, as an entrepreneur, it's always hard. Like, why should customers buy from you? Why should they believe you? And at that time, you had to rely on analysts like Gartner. And I remember it took us nine years to get in a Gartner report at Big Machines. You know, not till 2009. It took us 12 years to become the leader, and so that was very frustrating. And Gartner had exclusion criteria. You know, if you didn't do at least 20 million in enterprise revenue, they wouldn't even include you. So we thought that was obviously bad for the entrepreneurs, but we also thought it was bad for our customers because eventually at Big Machines we signed up big companies like GE Energy for their big turbines, Rolls-Royce for their big turbines. And some of our customers say to us, "Wow, we wish we'd found you two years ago." We've been trying to develop the software in-house. So we also saw our customers were suffering. They couldn't discover the latest technology, the best software. It was too hard for them to find it, and it was too hard for us to sell it. And that's why we said, "Wow, if we can create G2, you know, based on real-time peer reviews, make it really easy for software buyers to discover apps, make it really easy for them to buy it." And that's why we decided, let's make it more like internet consumer shopping. And by the time we started G2, obviously we were all shopping as consumers on Amazon. Anyone in the world can go to Amazon for free, discover products, look at reviews. All of that's free. And then you can easily buy the product and make it really easy for the best, the best technology to win based on happy customer reviews. That would really make our industry better. But we really built it for ourselves, you know, just kinda to scratch our own itch, where, like, after struggling to sell enterprise software for over 10 years, we just thought, "Wow, there must be a better way." And that's what inspired us to start G2. And G2, it's a term for military intelligence. So in the US military, the general's intelligence staff is called the G2. And in the military it means give me the G2, give me the quick insight what's happening in the battlefield. So that was the idea and why we went with, uh, with the name G2. At first it is really hard to get reviews. And so what we did, I remember for the first category, we only did one category of software. We did CRM software. Because at Big Machines we'd been partners to CRM vendors, so we knew that market. And so I remember what we did to get our first reviews, we put up a booth at Dreamforce, the big Salesforce annual CRM conference, and we were just handing out $5 Starbucks cards, you know, to get people to write a review of Salesforce or whatever CRM they were using. So it was a very manual effort at the beginning. And then, uh, but it took actually a couple years just to get that first category going, which actually led us to start Steelbrick because, you know, my co-founder, Tim, he was our product co-founder, he kept building G2, and I just said, "Hey, this is going too slowly for me." I went to go build Steelbrick with our CRO, Matt, 'cause frankly we also couldn't generate any revenue at G2, 'cause until we got enough reviews, till we had enough software buyer traffic from Google, we couldn't generate any revenue. So it was a really hard start. But eventually we also learned, you know, how do we tap into people's intrinsic motivations that they wanna share about their software. And then I think it's like a network effect business, and once we had enough reviews in CRM and enough traffic, then we started doing products related to CRM. You know, like email marketing, marketing automation. And then once we had a community of users, you know, once they reviewed their CRM app, they could also review their email marketing, their marketing automation. So we kinda started growing in related categories. And then we found some people do love to share. You know, some people do wanna share their expertise. They wanna help other people. And so eventually we got that flywheel going. And now I think we have over 2.7 million software reviews, and we've also brought it global. We have a partner in Japan now, for example, IT-Review.jp. It's a SoftBank C&S company. But we've even proven now that we can do it in Japan. Now we have, uh, we have great review insights in, you know, hundreds of categories. It probably took about five years not only to get the reviews, but then to get enough traffic, buyer traffic, and then to really be able to start making money. But I remember to me the turning point was 2017, Accel, you know, a very famous Silicon Valley VC firm, they'd also funded Facebook, but they called us all of a sudden and they said, "Wow, all our portfolio entrepreneurs, all the Accel entrepreneurs in their pitches to the Accel partners are starting to use their G2 reviews, their G2 ratings." And first I didn't believe it. You know, I was like, 'cause Tim, my co-founder, he got the inbound and I'm like, oh, the... You know, some of these VCs just call everybody. I'm like, "Oh, Tim, they're probably not serious." You know, but then I had a friend, Kevin Efrusy, who's a partner there, and I called him. I'm like, "Hey, are you guys really interested?" And they said yes. And that's kind of when I felt like, okay, if the VCs, leading Silicon Valley VCs, are starting to see this, and obviously and they want to put in money, and we had enough revenue traction. But at that point all of a sudden it felt like, okay, we have product market fit. This flywheel's starting to spin. But it, it took us five years I think to get there. When Accel invested we were maybe at 5 million ARR. You know, then all of a sudden we started doubling every year, and I think we grew to, you know, very quickly then grew to 50 million ARR, you know, by 2021, and that's when we became a unicorn. But then I think, like, zero to five took a really long time, and then five to 50 it started to happen really quickly 'cause we had that product market fit. Plus SaaS was booming. You know, there were also so many new SaaS products. I remember we were creating categories like conversational intelligence, and we helped create unicorns like Gong, Chorus. You know, so we started seeing the model really work where we could help, you know, define whole new categories like conversational intelligence, help buyers discover those new apps, and help the vendors win quicker. And so then all of a sudden it, you know, it became really exciting and, and fun. You know, I think the challenge every entrepreneur is at the beginning no one's heard of you, and nobody's heard of your company, nobody knows your brand. And so it's really hard just to get a chance to win customers. And so I think that's probably the number one reason. 'Cause once you have good reviews on G2, then buyers will discover you on g2.com, so it can be a very efficient way to generate leads. And then I think the second big reason is every entrepreneur needs validation. And that was, like, my inspiration, 'cause, you know, I, nobody wants to wait nine years to get in the Gartner report. Now I think we have created this trust badge, you know, that entrepreneurs are proud of. So it's also a quick way to validate that their customers love them, that they have a great product. And what's interesting now, we also have VC customers. You know, we have about 60 investors that use G2 data to also figure out which companies they're gonna invest in. And so for an entrepreneur now it's doubly valuable, because once you get those badges, once you're doing well on G2, one, you get more buyers, more customers. That's the most important thing. But frankly also investors notice. They look at the trends in our data. And all of a sudden they also start getting calls from VCs. And so I think for that reason... And I've always been that software entrepreneur. You know, we built Big Machines, we built Steelbrick. I kinda, we kinda built it for ourselves. We know what they needed, and it's wonderful now to see it working. And really an entrepreneur anywhere in the world can start and, and once they get that validation on G2 it helps them, you know, prove that they have a great product and it helps them grow faster, and that makes me really happy. You know, 'cause I, I consider software entrepreneurs kind of my, my brothers around the world, and, uh, we love helping them, you know, validate their success and then grow faster.

7. 17:47 – 20:00

   Advice for Founders Going Through Their Hardest Moment

   1. SPSpeaker17:48

      I think the first one's the hardest. And maybe it's also like parenting. You know, if you have kids I think the first kid's always the hardest 'cause you don't know what to expect. And it's still hard and challenging, but I think we have... Now, now I feel like I have more perspective. Like, one, I'm really choosing to do it. I love building companies. I've realized that. And I love the challenge. And even when we have the lows, and we still have them, you know, you lose a customer, you lose a deal- You lose an employee, it still feels really terrible. But then I also know that for every low, there's a high. You win a new deal, you recruit somebody amazing, you get to a liquidity event. And, and I've kind of realized that the highs don't come without the lows. When I'm not doing it, I miss it. So I think that's why we're, you know, we're still building companies now, you know, 25 years into it. You really have to believe in your own vision and really believe that what you're building is gonna make the world better. And I do think also in B2B SaaS, it really has to be an idea that where you have founder-market fit, where you really believe, and it's a pain you've felt. And that was like with G2, right? We felt the pain so severely because it took us so long to build Big Machines, so long to create product-market fit, where we wanted a solution like G2 to make it easy for our customers to discover us, make it easier to grow our business. And so I think really believing in your idea, really believing in your vision, I think is what allows you not to pivot too quickly. I think most SaaS entrepreneurs, you know, probably at a minimum typically it's two to three years to get to real product-market fit. So you also just have to have that mindset, like, "Hey, it's gonna take a long time." And your pivots are probably smaller. You know what I mean? You're optimizing within the product, within your vision, versus completely scrapping your vision. Say, the right time to pivot, and honestly, most of my companies, we've stuck to the founding vision. And most of the optimization, there's a thousand details, you know, to bring that vision to life. Like at G2, we had thousands of optimization to improve our view conversion, but we never shied away from the idea that reviews were gonna be critical, you know, to help software buyers and sellers connect better. Yeah, I guess to me it's if you really believe in your vision, I would never pivot. [gentle music]

Episode duration: 20:08