BSMS 31 - T2D3: How some software startups scale, where many fail

• Building a complete marketing function 
• Nailing your niche and defining your company identity 
• Understanding and deciding on your company's growth priorities, and expanding recurring revenue 
• Frameworks, graphics, and best practices, so you can both understand and execute
• Templates and a content ecosystem you can access through the website

Episode Transcript:

Richard:

Hello and welcome to Episode 31 of B2B SaaS Marketing Snacks. I'm going to be giving the introduction for today. My name is Richard. I work on the product team here at Kalungi. We're back. Sorry for the delay. Sorry for the hiatus. We've missed you all. We've missed doing the podcast.

The reason for the delay is really that we've been working super hard on Stijn's new book, which is called T2D3, and unsurprisingly, is the topic of the episode today. So Stijn has released a wonderful book, which he's written alongside Mike called T2D3. The book is out now on Amazon, both available on Kindle and in paperback. You can order it. You can get a physical copy. The episode that you're about to listen to was recorded right before the launch. We launched it on October 19th. So that was a very exciting day, and it's been exciting since then.

The book is really for you, if you're curious about going deep on B2B SaaS marketing, and really understanding how to scale your business and achieve that unicorn status. All that jazz. So it's definitely something you should check out if that interests you, but it's also just really a good read. Stijn's got a lot of stories to share, and he definitely shares a lot in this book. So go check it out. You can check it out at T2D3.pro.

And without further ado, I think I'm just going to let Mike and Stijn get into the conversation. One note is that if you would please excuse the bad audio quality that comes in about a minute in, I think it goes away about three minutes in. We recorded with the wrong device, so please excuse that. But without further ado, here's the episode.

Mike:

So we thought that we would do a podcast episode specifically talking about the book, what the inspiration was for it, and some more of the details, because we've kind of dropped hints, but we haven't really gone into a lot of depth on the podcast. So, I guess it would be really cool, Stijn. If you could maybe talk a little bit about what inspired the book in the first place. Maybe about what the problem was that you first saw that made you want to write the book, and who it's for.

Stijn:

Yeah.

Mike:

and kind of go from there...

Stijn:

The date is October 19th. So that's when it will be shipping out to people either electronically or physically. I've also tried to convince Mike, for all the listeners, to do the audiobook because of his nice booming voice. So that will come at some point, too. Probably read partly by both of us. 

Why this book, Mike? Yeah, it took about probably four or five years to write. Some of the people listening to this podcast, people who've signed up for early access, have probably gotten a little impatient with us keeping postponing the dates. It's partly because we keep adding insights and new things we learn. Partly because of the podcast we're doing and the feedback we're getting. So, it's work in progress. I also imagine there'll be a couple of other books following. But why this one? And who's it for? What's it for?

T2D3 was created as a concept about... I think it's 2018-ish, 2017-ish, about five years ago. I had left Microsoft in 2012, and then did two startups, Acumatica, the Cloud ERP company, and then MightyCall, which was a B2B SaaS startup. But it was really a pivot from a traditional software company called Infratel. Both were under that $10 million ARR milestone when I got there. I got them up closer to that $10 million milestone. What I found is that the things you needed to do were all very similar. My team and I started to create Trello boards that had cards in it that were very vanilla, almost. Things that would apply to every B2B SaaS startup. Some of those were informed by the work that I had done at Microsoft, where I ran product marketing for Office, for the B2B audience, which included launching Office 365 and creating the plan for that and all the marketing behind that.

And there are so many patterns that started to match up. Creating a book out of that was only a matter of time. It took a while. What you'll see in the book is a lot of the things we learned to do at Kalungi, as well, where we do what's called Growth as a Service for B2B SaaS companies. The audience is really the leaders, the owners, the CEOs, the founders of these companies and the teams that they're building. It's very much focused on the post-seed, the post-incubation stage of growth. Getting to MVP, getting your first product out the door without a lot of external funding is a part of the journey that's less focused on. We have less focus on that in the book. I think there are many other books that do that. Zero to One, is an example, The Lean Startup...

What T2D3 is really focused on is the journey that comes after that. That's also where the name of the book came from. An investor did an interview in 2015, with TechCrunch, one of the Battery Ventures managing partners. And he used this term for the first time there. I don't know if he came up with it. He's said to have coined it. I've heard it in many other places, also from many other sources. It stands for triple your annual recurring revenue two years in a row. And then double it three more years in a row. So that article appeared in TechCrunch. I started hearing this term once in a while, used by VCs, sometimes by founders. And there was actually very little content that answers the question, "How do you do that?"

So as we started, in the last four or five years, codify the work that both myself, and then the team at Kalungi has done with early stage ventures, to scale up all B2B SaaS, to really build the engine, the foundation for exponential growth, this was kind of a logical next format. In addition to the podcast we do and the blogs we write, to put it in a book. The main problem that it solves for, I think, and there are many topics that we address, is that when you're a founder, CEO, or a leader of a small company, and you're attracting venture capital or external capital, now you suddenly have a new boss. You have your investors now that are going to hold you accountable. You have to learn how to manage up. That's one thing you need to go do. But that's not the most important, right? The most important is that you actually put that capital to work and get your company to the next stage.

There are three things that you will immediately start struggling with... Or that you usually see CEOs and founders struggle with. They're speed, scale, and getting the right skills. These three s’s. Speed is probably the clearest to the early stage founder who just got venture capital. Now the clock started ticking. They are now being held accountable to a new set of expectations, a new set of rules. T2D3 is mostly a VC term. It's kind of what the investor now expects you to do after they give you their money. And they would like you to do that relatively fast. VC capital has a relatively high risk profile, so most VC investors don't expect many of their investments to hit it big. But they need a couple to hit it really big to make the numbers work. So they kind of hold all their investments, all their portfolio companies accountable to that same high bar, and sometimes that's described as T2D3.

So now you're there sitting as a CEO or a founder, and you got a couple million dollars maybe in the Series A or a big seed round, and you now have to go fast. How do you speed things up? How do you build the right team? At the same time, make sure you keep your customers. All those things are really hard. So, scaling up is tough at the right speed. And there's a formula for that. To do T2D3, you need to do a couple things in parallel. You need to keep your customers. You need to grow ARPU expansion. You need to diversify your demand gen channels. Those are really the things that we discuss in the book. How do you do that?

Partly because... The third S is skills, right?... It's hard for early stage companies to both attract and retain the right talent. Most marketing and sales talent, or product-led growth talent... Those are the three ways you can scale... or in some type combination: market-led growth, sales-led growth, sometimes called inbound and outbound, and product-led growth. For all those three, getting the right talent and keeping them is very hard. Series B, Series C companies that have a little more capital will steal anyone who's good away from you. You're competing with Amazon and Google and Microsoft for that same talent pool. So it's challenging.

This book gives you a little bit of a head start with the skills that are also hard to hire, so that you can maybe build your own team, and hand them some of the playbooks and the templates to get going. So that's why we wrote the book, Mike. I'm glad you helped me with it, because a lot of this is not only what I experienced in the last 10 or 15 years, but what we did at Kalungi, when we worked with clients. How we constantly evolved the methodology.

Mike:

Mm-hmm (affirmative). And what would you say the balance is between things like stories, through your own experience, versus things like frameworks and stuff that people can actually take and go use in their day-to-day?

Stijn:

Yeah. We tried to make the book relatively practical and mostly a utility manual. Like a field guide. So, you find a lot of lists, a lot of simple tables, exercises to do with your team, with your customers sometimes. How do you write up your first customer testimonial? Here are the 24 questions to ask. Here's what to do with the answers that you get on those questions. So a lot of it is very practical, Mike. But it also addresses some of the more strategic choices you're making as a leadership team, right, around positioning. What I call the Big M Marketing Topics, the go-to-market strategy choices you're making. Those are extremely hard, often, for early stage founders and CEOs, because that's where you really need the more experienced marketing and sales talents to help you with those. Those are typically not affordable.

So the book has a balance. We try to address both those big M marketing topics that you as a CEO or a founder need to really lean into yourself. And then also a lot of best practices and lists and templates of the tactical execution that your team needs to go do with this new investment that you just got.

Mike:

Mm-hmm (affirmative) One of the things I think is really cool about how you structured the book is, you've broken it into these different stages: getting to MVP, then product-market fit, then scaling up and getting to T2D3. You have different priorities and things to do in each of those segments, which is really helpful. Because, especially now, there's so much information everywhere about all these different things that you could do to build a go-to-market. Should you be focusing on content? What kind of content? What kind of paid channels? Should you be doing partnerships? Et cetera, et cetera. It's really difficult to filter out the sequence for all those things. What I really like about T2D3, the book, is that it gives you a step-by-step at each of those stages to focus on, which is really nice. I think that's really helpful.

Stijn:

Yeah, Mike, that's super important. Not only the fact that you have to your MVP stage and then you get to product-market fit and T2D3. You have to do it in the right sequence. There are so many leaders who... Yesterday, we went to an event where we were fortunate to hear Andy Jassy speak, the new CEO of Amazon. He had this saying, "Speed is a leadership choice." He talked about strategic patience versus technical impatience. When a leader chooses to go fast, and often they're incentivized to do so by the investment they just accepted, it is really important not to cut corners. In the book, we use the baseball analogy, "You cannot get to third base without passing through second base."

And that's product-market fit. You have to hit product-market fit. You really have to hit product-market fit. Not, "It's kind of product-market fit."

Mike:

Good enough.

Stijn:

You have to have enough customers that actually pay and stay. Right? There's a lot of other things to talk about in the book that define product-market fit. That's the only way you can actually achieve T2D3 growth after that, by pouring the new... the gasoline that you just received from your investors, on the right fires, and at the right speed. The book, I think, tries to format the journey in those steps, MVP, product-market fit, T2D3, and give you not only instruments to see where are you? But then also, how do you get to the next level?

Yeah, Mike, what I really found a super interesting exercise that you and I went through together. That was one of the reasons I think the book arrives a little later than we originally anticipated.

Mike:

You're going to blame it on me now, eh?

Stijn:

No, it was super cool to see some of the questions you asked. I have this framework that I came up with probably four or five years ago around matching the way you make your go-to-market choices, for example, market segmentation. Do you think of segmenting your market through firmographics, demographics, more traditional segmentation models, or do you use more psychographics and job-to-be-done frameworks, because that is typically more suitable for categories that are still being formed. Categories that are very immature, where you don't necessarily know what the job title is for someone who cares about what you are offering.

Then a demographic firmographic just doesn't work from a market segmentation perspective. There are no verticals yet that are clear beachheads, for what you have to offer. So that whole chapter on going-to-market based on the right combination of market maturity and the maturity of your own solution... product-market fit, MVP, etc., was a super interesting discussion that you and I had. How do you not only talk about that in theory, but how do you make it a little more practical? Right?

Mike:

Right.

Mike:

I think it's a new concept that we introduce in the book, to look at both those journeys in parallel. Where are you in your journey with your product? With your solution? Where is it on that MVP, product-market fit, T2D3 journey? And where is the category that you're in? How mature is the category... because you need to look at both.

What really helped me...and that only happened in the last couple of months, and we have a graph in the book now on this called makers and shakers... to think about those two dimensions as really answering some technical questions. Do you need to be ready to make a market? Which means you have to educate a market. You probably have to go knock on some doors, do more outbound. There might not be enough inbound traffic yet, because people don't even know what questions to ask in the Google search engine. 

Mike:

They don’t know what the problems are, yeah. 

Stijn:

So, that might be a reason to do certain things early on. Then you need to invest in those. Then, when you are more in a mature market, we call that shaking. You have to shake up the market. You have to nail a niche. You have to differentiate, niche down.

You need to be ready for that market to be relatively expensive. The clicks will be expensive there because there are many people, maybe, bidding on the same keywords. So how to think about that? Where are you on both those journeys to figure out are you going to have to make the market, or you have to go shake it up and differentiate or disrupt it? Those would be the two strategies to shake up a market. Where, while you are making the market, you could be a dominate strategy. So, it was just super cool in the last couple of months how we could add some of those things to the book that were definitely not clear a couple of years ago for me.

Mike:

Mm-hmm (affirmative) Yeah. And this is maybe a,...let's see how this goes. Is there anybody this book is not for? Who would you not recommend this book for?

Stijn:

I think if you have people in your team who are just getting started with marketing and sales, it does provide opportunity for people to just go do stuff, which might not be the right stuff, right? It might not be in the right market, with the right strategic direction. So, if you're not necessarily in the luxury position that you have a strong marketing leader who has done some of this before, then you, as the CEO, the founder, will have to lean in. You are the CMO. And then handing this book to maybe a college graduate who has not done this type of marketing before, or someone who just recently graduated from an MBA, might not work out well. You probably need to lean in more yourself. The primary audience is founders and CEOs, or their CMOs who have the executive experience to make some of these big choices. And then it does help you enable really laser-focused execution. Right? Then some of the chapters in the book are super useful for more junior team members. For example, how do you do a customer testimonial interview?

Mike:

Sure.

Stijn:

Or how do you set up your funnel? How do you do AB testing? How do you run experiments? All these technical things that you also need to go do. I would be careful to hand it to a more junior marketing team member without any adult supervision.

Mike:

Sure. Without the right frame.

Stijn:

Yeah.

Mike:

And the ability to get buy-in, too, I think, the frameworks and the tools and the way that things are thought about in the book is really important for someone who is looking to level up in their marketing career. I think it helps you think about things more strategically. But yes, I agree. I think there has to be a lot of... What we talk about in the book requires executive leadership team buy-in, and agreement across the whole company that, "These are the things that we're going to go prioritize." It's not just marketing, it's also alignment with sales and customer success and the product team. It's not just a marketing team responsibility to go execute on these things. I think as a CEO or founder, you have the role of being able to get buy-in across the whole team.

Stijn:

Where can they find the book, Mike?

Mike:

On Amazon, for now. Amazon.com. If you search "T2D3 book", that'll get you there. Or if you go to T2D3.pro, you'll see the CTA, and it will take you to the website as well.

Stijn:

Exciting. Yeah. We still got some work to do to get the audiobook done, but I'm so proud that we have a launch date for both the e-book and the paperback. Yeah. And Let us know what you think, everyone who's listening to this podcast. We'd love to make the book better as well, in the next edition. And we hope it's helpful.

Mike:

Absolutely. Plans for a sequel?

Stijn: 

Yeah. I think there's... at some point I had 600 pages. Now, the book is more... It's under 300 pages. There's a whole book to be written on what comes after T2D3, which is sometimes coined as the route to $100 Million ARR or the rule of 40. That might be the title of the book, Mike, Rule of 40. Something that really talks about, "How do you now go from fast, high, exponential growth to making that growth profitable?" A lot of companies in high exponential growth mode, they reduce churn by building big customer success teams, right? Which is fine. Which is good. It's a great way to get more customers to build your beachheads, nail some niches.

But when you need to go to profitability, you need to be able to do customer success, for example, with less people investments. Your product has to get better. The marketing tools that you use, the nurturing, etc., to onboard people have to be less reliant on you hiring more customer success managers. This rule of 40 stands for keeping your growth going, but also doing it in a profitable way, 40% basically being the sum of your compound annual growth rate and your profitability. If those, both together, add up to 40%, then you're doing something really well.

So, this book is focused on that. How do you go from high growth to high profitable growth? It addresses a lot of things we didn't get to in T2D3 around, how do you build your first board of directors? How do you manage those as a CEO? What is it like to be on the board of a B2B SaaS company? What do you look for? How do you help these companies when you're a board member? Investment topics. How do you make your first pitches? How do you build your first pitch deck? How do you build maybe a community of advisors that help your company get to the next level? So, a lot of these topics that are later stage, that come after your initial series A, a high exponential growth journey, will be covered in a book that we should probably start writing right now.

Mike:

Let's get to it.

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