By MICHAEL CARDAMONE in SaaStr on April 7, 2017
Flexport is one of the fastest growing companies in the world and has raised close to $100M in funding from Founders Fund, First Round Capital, Bloomberg Beta, Susa Ventures and others. If you are not familiar with them, they are a licensed customs brokerage and freight forwarder built around a modern web application that helps brands move products around the world. I spoke to their CEO, Ryan Petersen, to see if I could pull out some key lessons learned from their success so far.
- Clearly understand how your customer buys. Are you selling a product in a well defined category with other direct competitors? Are you replacing an existing legacy system that companies already spend money on? Are you defining an entirely new category? Flexport is replacing an existing solution companies already spend a lot of money on with a far better product, so SEO and SEM worked very well for them by targeting keywords around the pain points their customers have and were already searching for. Make sure you know how your customers buy and tailor your go to market strategy and messaging to that.
- Get great at list building. Ryan’s previous company, ImportGenius, was the largest provider of business intelligence to the import-export industry, which gave them access to an extremely valuable list of customers, trade data, and understanding of the international trade market. Most companies don’t have that luxury. When building a list, try to define your potential customer as granularly as possible – size, location, industry, ideal buyer, sales process, technology stack, etc. This will allow you to be much more targeted with your messaging when reaching out and will help you optimize your sales funnel.
- Pricing is always evolving. Flexport started out by giving the software away for free and charging for moving the freight, which has worked amazingly well for them. As they have scaled and gone up market, they are finding some large companies just want to use the software but move so much volume they can contract directly with the ocean carriers; so they are starting to charge those companies a pure software fee. Pricing is one of the trickiest topics for SaaS founders and is something that is always evolving as you continue to get a better understanding of your customers, the value your product drives for them and your own sales process. Be willing to iterate and push the envelope on pricing, and make sure your pricing lines up with your sales process.
- Measure customer NPS early and make it a key KPI for the business. NPS is one of the three core metrics, along with revenue and unit economics, they use to steer the business. They have been able to maintain an NPS in the high 50’s to mid 70’s since the inception of Flexport. By focusing on it early on, it became an integral part of their culture and kept them focused on delivering an amazing product and service.
- Your role as CEO will evolve during each stage of the business, embrace it. Ryan generally splits time between sales, recruiting, investor/public relations, culture and product vision but the time split between those is different at every phase of the company. Very early on it’s weighted towards product vision and sales. As you start scaling, that shifts to more of a focus on recruiting. I just spoke to a SaaS CEO this week that is at Series B and he said he spends 50%+ of his time recruiting now.
Given SaaStr’s recent expansion to NYC, I wanted to ask Ryan what drove him to open their NYC office last year after starting the company in SF.
“We opened our NYC office 11 months ago because we were flying teams there every week to meet with customers and prospects. At some point it became obvious we had to send a team out. NYC might be the hardest working city in America. It’s a fantastic place to hire sales people, account managers, customer service team members and startup hustlers.”
Lastly, Ryan is an advisor and mentor to other founders and I asked him what advice he gives to founders he spends time with and below was his response:
1) Don’t wait for someone else’s permission to do your business. If you’re doing something that requires venture capital to get off the ground, or else it’s not going to be a business, you better be sure you can raise that money. Because if you can’t, it’s your fault, there are plenty of other business ideas that you could do that don’t require any venture capital. Saying that you need VC before you start your business either means that you don’t really care that much about your problem—if you did you would just get started doing it—or that you are the wrong person to start the business. Much better to do something easier that doesn’t require VC, but that can be profitable, learn how to start a profitable business, and in the process build up a track record so that on your next business you can swing for the fences with venture capital backing.
2) Spend all your time on achieving product-market fit until you have it. Don’t get married to an idea before you are certain that other people see the same problem and would be willing to pay for your solution to it. Talk to users non-stop, and build things based on their feedback. Until you have product-market fit, any time spent doing anything that is not talking to users or building something they want is wasted.
3) Recruit a jack of all trades former investment banking analyst or junior consultant who is passionate about your business and ready to work even more crazy startup hours to help get it off the ground. You need a very smart person on your team who is willing to grind down any obstacle to push the business forward. This will free you up to work “on” the business, not just “in” the business. If you can’t afford that person, you’ll have to be very conscious about finding time to be strategic, to working on improving the business, not just doing the day-to-day work of the company all the time.