The Exchanges

Q we love you, but we have to rib you a little bit because I know I love, I love, I love you guys more. This is great. So, okay. Now, so that's the, that's sort of story on paddle side. Patrick, let's quickly go fill in your sort of middle eight years here, right? That first 100,000 bucks in sales that you landed, what were you selling? What'd you sell?

A Yeah. So we, we had this 50 dollar, I had this 50 dollar a month pricing software product. We, uh, yeah, great, great price for pricing. Um, uh, and, um, we ended up having like this guy named Scott Kersner, who's a Boston Globe columnist. Um, he basically wrote this article. Like I, I kinda, I didn't beg him, but I was definitely like, oh, it'd be really great if Scott Kersner wrote an article on us. And so I had a, I had some inbound and We had compete, compete.com, which some old school folks listening might remember smart bear and, um, Hallmark and Adidas. Like these five, these four companies contacted us off the article and, uh, oh, and run key. Uh, I think run keeper at the time as well. And basically, um, three of them were like, yeah, cool software product. Can you just do the thing for us? Like, can you just give us the data at the end rather than us doing all the like stuff with the software?

AI assessment note: “I had this 50 dollar a month pricing software product.”

Q Now, how do you manage, uh, we talked technically pre-call about this, obviously margins between SaaS and a high-touch human product are very different. Um, two questions there. One, how do you manage margins on both outlets? And two, how do you manage your time, uh, focused on kind of professional services versus pure play, low-touch SaaS software?

A Yeah, totally. So on, on the margin front, our margins are actually SaaS style margins on the pro serve side. Um, and the reason that we get that is because we're not selling like a traditional service. Like it's not like, You go into HubSpot and you ask for some training and they'll give you some training for a 40% margin or something like that. We're actually selling it as a product and as the team comes with the product, if you will. Um, and that just comes down to good pricing, which is basically we have really, really good pricing, which allows us to go after really, really high ARPU as well as really, really good automation to make sure that our margin are in the 85, you know, 90% range, similar to a regular software product. Um, from like a team management perspective, Um, this just comes down to hiring, you know, the right people. And so for a long time, we basically managed both products kind of separately. So we had almost like a price intelligently team and then we had a profitable team. Now those teams are starting to blend together, but we still have, um, essentially a GM of price intelligently where he runs both the sales side for that product as well as the actual fulfillment, um, with the tech enabled services team.

AI assessment note: “our margins are actually SaaS style margins on the pro serve side.”

Q And how did you do that? You're not an engineer, right? Or are you an engineer?

A Data science. So I have a data science. I can, I can do a lot of modeling and stuff like that. And so like, I would never call myself an engineer, but like data science, absolutely. That's the kind of work I was doing at NSA. Um, and then at Google, like I use some of the similar models to basically build this. Um, all it was, was like a, um, um, It just, it took a book of business, like a sales book of business and prioritized it. That's really all it did because at Google, their sales teams aren't like true sales teams. They basically say like, here's 90 accounts, go grow them. Right. And it's like over a quarter, like 90 accounts, it's like, it's a prioritization problem. So I built this thing that basically said, Hey, I know like the quant team told you that, you know, these are the accounts you should focus on, but like, they don't have these bottom up inputs, put in these bottom up inputs and we'll prioritize it. I think the first quarter I did it, I hit like a 180% without like working that hard. And then I started scaling it manually across the sales teams. I made Google a ton of money, but the point I was trying to make was like, they gave me an award and like a 5000 dollar bonus. And they were like, yeah, we're going to shut this down. And I was like, why? They're like, well, it's really cool. But like this, it's like, you know, six hundred million dollar opportunity …

AI assessment note: “I would never call myself an engineer, but like data science, absolutely.”

Q what you can expect. So, um, I guess, um, moving forward, guys, uh, so the space combined together, obviously you're building this together. One of the things you told me pre-show is you feel like what's getting a Bit lost in translation here is that you guys are really thinking about it, thinking about this as sort of a do it for you play moving forward. What does that mean?

A So the basic idea is that if you think about the first wave of SaaS, like let's say it's 2000 to 2015, it was very focused on like building tools that allowed, enabled you to do work or enabled you to show your boss you're doing work. Um, you think about Salesforce, like Salesforce isn't built for the sales rep. It's built for the VP or the director level, the reporting, making sure the AEs are doing their activities. Um, I think as the market's gotten more and more competitive, This next wave of SaaS is basically focused on like, how do I enable you, Nathan, the ability to focus on your customer and focus on basically your product and your team, the three things that you should be focused on, um, by basically taking all this other stuff off your plate and doing it for you. And you're seeing this in a number of different ways that like products are being built. Um, like rippling is being built in a very, like, you know, do it for you way. You have products like main street, all these other things where it's like, you just plug something in, or you just put in some inputs. And it's just taken care of for you. Um, the most dramatic example of this has been like, you know, basically the, the, the, the robot, you know, type tools, um, you know, even Zapier, these types of things. I think that's the next wave of where things are going and where we kind of feel Is there's all these t…

AI assessment note: “taking all this other stuff off your plate and doing it for you”

Q Okay. And I mean, is that what now the free version of ProfitWell eventually became? Was that original tool that was

A No, no, no, no. So we, there's, there were two things we were trying to find. So the first idea was, well, what if we hosted every SAS pricing page in the world? Like, what would that look like? Right? Like that was the first idea. And then slowly over time, we were like, well, if we're going to optimize the pricing page, we need this other data. Like we need up funnel data. We need retention data. We need all like, we need a unified data stack. And we're like, okay, well, what if we just went and got the unified data stack? Right. Like we wanted this like product that could like, you know, be more pure software. And so that was the original idea, um, was kind of like, what if new relic was for revenue? Like what would new relic look like for revenue? Like revenue monitoring. Right. Um, and then we were helping a company is about to IPO with their pricing. And we discovered that they were calculating churn and MRR incorrectly. So we kind of started on this, like, cool, let's do this financial metrics product. And we got out there. Um, we had like 10 people on it.

AI assessment note: “No, no, no, no. So we, there's, there were two things”

Q Yep, so you, I mean, you probably don't care much about this just because of the nature of how profitable you're running the company, but I mean, do you look at a fully weighted CAC, just take all your headcount, divide by new customers that month, or does that number not mean a lot to you?

A Um, we do it. We don't do it as like a active exercise, if that makes sense. So it's not like I could literally pull that number for each month for the past year, but we do look at it just in terms of making sure that, um, or, or it's, I should say that we're looking at it more and more because we're going to start spending more money and basically investing more in marketing. So, um, we do have very basic LTV to CAC by channel right now. Um, we have very, very basic, um, kind of, um, I call it fragmented CAC, meaning like someone who talked to a salesperson, Versus someone who did this, just kind of seeing like the different processes through the, what they went through. Um, but it's not, it's not quite something that we are like, it's reported every single month quite yet. Probably in the next three to six months, we'll have scary numbers that, you know, we can break down to any nth degree we would like.

AI assessment note: “We do it. We don't do it as like a active exercise”

Q Yep. Makes good sense. Um, how do you beat companies like Barometrics?

A So, um, we haven't really been worried about them as much anymore. Um, because I think we're, we're definitely like on parity with them. I think our, our big thing has been accuracy. So we found out early on that if the numbers are accurate, people are going to stay with us. Um, and so what we've done is we've spent a ton of time in being the number one, you know, in terms of accuracy, and now it's just getting more and more features. And so we're, we're ahead of them in terms of the amount of like dev resources that we have. And so what's, what's started to come up, come about is basically we're starting to release a lot of features that we're starting to see more churn from them and more people to come to us, including, you know, chart mogul as well, which is another, you know, big company in the space. So I think we're, we're thankfully, whether it's arrogant or not, we're thinking about Like, how do we disrupt Looker? Like, that's what we're thinking about. Like, where does that go? Especially with a free product. Like, how do we develop that? And that's not going to happen in the next six months. It's going to happen in the next couple of years, essentially.

AI assessment note: “our big thing has been accuracy... ahead of them in terms of the amount of like dev resources”

Q then 3.6. Sorry. That was my fault. And now December 17 around eight. That's how that's really healthy growth. Um, how have you resisted the urge? I'm sure you're getting flooded with inbound, you know, inside venture, all these people going, let us give you money. How have you resist, excuse me, how have you resisted the urge and would you ever accept and take capital to drive the business?

A Yeah, for us, it's, um, like, you know how it is. I mean, you buy companies, and you sell companies, like, you know how the game is. It's a function, it's a tool, right? Like, that's what equity and capital is, and so for us, we, whether it's through stupidity or intelligence, we, we don't have, like, a very clear reason of what we would do with that money, so I couldn't tell you, like, right now, Hey, if we had three million dollars right now that we raised or eight million dollars that we raised, here's exactly what we would do with it. And for us, like, if we don't have that reason in particular, it just doesn't make sense to raise it. So that's kind of how we look at it. I think we may raise money at some point. We're not really interested in, like, taking any money off the table right now. Um, we're not really interested.

AI assessment note: “if we don't have that reason in particular, it just doesn't make sense to raise”

Q Now, Patrick, these guys deserve a lot of credit for, maybe it wasn't the perfect situation, but they just heard you out. You got to a solution you liked. I mean, can we name them to give them credit? I mean, people can look these two people up and it's pretty clear who they are. I think they deserve some credit.

A I love these guys. Like, don't get me wrong. And they've helped the business in many, many ways. Like they've, they've pushed me, they've pushed the business forward. So like, there's no animosity on my end. I don't think there's any animosity on their end. Like I, we, they got good chunks, like good, good checks, you know, the last couple of weeks here, but I know that that is true. Yeah. Yeah. So it's not like a, it's, it's not an animosity thing. Yeah. Like Christopher O'Donnell, like, um, Christopher O'Donnell and I are like very similar in many different ways. I think that's why, um, we work really well together in terms of like trying to create greatness. Like he made HubSpot what it is. He is top 10 product leader in the world, like in the freaking world in terms of B to B SaaS. Um, and Aaron White, one of the best technologists, um, you know, I've ever met. Uh, he's now running, uh, he's a CTO and running tech over at, um, vendor, um, Yeah. These guys are, these, these guys are my brothers. And so like, I don't bring up the story for any animosity. I bring up the story of like, it would have saved all three of us a lot of like bullshit and emotions. Like if we would have just handled this the other way. And I'm 99% certain they, they agree with this as well. Like, I don't, we haven't, we kind of like stopped talking about it four or five years ago because we were like, …

AI assessment note: “Christopher O'Donnell... and Aaron White, one of the best technologists”

Q And to close that open loop, what do you guys define as the market you're playing in today? What are you going after?

A Yeah, it's a good question. I think the way we we've been looking at it is like payment infrastructure. I think that's a big thing that we think about. Like you have these infrastructure companies that are like Stripe, you know, in our space and then obviously like AWS and other spaces and stuff like that. And then those infrastructure companies help you support, build whatever app, like every single person you interview or listening to this podcast. Um, we're kind of in the middle, like we're going to do for, um, The subscription dollar, what Salesforce did for the customer record, um, where a dollar through paddle is going to be worth, you know, a lot more coming out of paddle, um, than using infrastructure that, you know, is currently on the market basically.

AI assessment note: “the way we we've been looking at it is like payment infrastructure”

Q So there's a pricing, there's a pricing change coming up, Patrick, huh?

A There's a pricing change. So I think what's, what's really kind of funny and what I was going to jump in there with is like, when you look at five percent, right? It's like, oh my gosh, like there's, there's an initial reaction and that does happen on the sales call, but like to contextualize that, like, it's not like we're just processing payments, right? Like if you were, if we were just processing payments, like that would be a very like dramatic, like, oh my gosh, like, why are you guys so expensive? Right. I think what people don't understand is like the complexity of what paddle actually does. Um, tax is completely taken care of. Like, not like, Hey, we show you how much tax it's like, no, no, no. It's completely taken care of. Like if your tax gets messed up, we go to jail. Like you don't go to jail. We go to jail because we're the ones that are actually paying those actual taxes. Right. We handle like payment orchestration in the sense of like, oh, um, it looks like, uh, checkout.com is a better like backend. Like that's what we're going to process the payment through versus like Stripe versus where these other things are. And then currencies, all this other stuff out of the box. And so that's, That's the thing that I'm working on in terms of pricing is like, how do we best contextualize it so that when you look at that five percent, you're not like comparing it to, wel…

AI assessment note: “There's a pricing change.”

Q Profit. Well, what's your utility based pricing, uh, kind of axis that you price around and what's the average customer pay you per month?

A Yeah. So profitable is free. Um, the metrics, the baseline metrics are free. So you plug in stripes or whatever you're using and you get free access and I can get into why we gave it away for free, but, um, we have a number of products that sit on top of it, including price intelligently. So price intelligently. Um, it's value-based pricing based on the size of our customer, as well as the scope of what they want us to help with on the pricing side. So it's a little bit of features as well as their size. Um, we have a product called Retain that solves your churn. That is, that value metric's the purest value metric can get. It's based on cash that we recover for you. So if we don't make you money, you don't pay anything. If we make you a lot of money, you pay us a lot of money, but it's not as much as we made you. Um, and then we have a ProfitWell recognized product, which is an accounting product that Basically is priced based on the size of the company as well. Um, so that's kind of the utility, but if you'll notice, like all of those are different value metrics that as they grow, we're also going to grow in our revenue theoretically.

AI assessment note: “all of those are different value metrics that as they grow”

Q first exit done. It doesn't have to be 10 X. It doesn't have to be a Christian Patrick deal. Just get your first deal done. So you have some money so you can go double down on yourself the next thing. And Patrick, if you know, who knows, right? But if you maybe had 500 grand when you launched, Maybe it would have been a cleaner captive from day one.

A Maybe. Yeah, I think that, um, It's not always about money. Right. I think like dating your, your, your co-founder for a little bit or dating those folks. Like I know, like for the rest of my life, like I'm building companies with the people I'm already building with. Right. And I, and like the plus or minus of those people will just depend on interest and timing in those types of things. But like, I think it's one of those things where we're like finding that tribe is like almost more important. Right. Like I think like, for example, like Harrison's not in the business anymore. Right. Like Christian or Christopher and Aaron, like I haven't like directly worked with, but like the next company, if we're like, oh, cool. We're going to start this cool thing. Like there's a list of people like we contact first. Right. Because we, they're known quantities. Like we know strengths, weaknesses. We know all of those things. And it's like, yeah, like I don't know Harrison that well, but what I know of Harrison is like,

AI assessment note: “It's not always about money. Right. I think like dating your, your, your co-founder”

Q All right. So, you get going. What, what, Is the profit well or price intelligently MVP? And same question, do you sole founder or multiple founders?

A Yeah. So, um, not a great origin story there or like founding story. Um, I think everything's good now and everything worked out obviously, but like, uh, I'd never founded a company before I got introduced. I started getting into the Boston ecosystem. I got introduced to these other two, uh, people who were thinking about like the similar space. And one of them had never started a company before the other had only done venture backed stuff and wasn't like a founder. And so all of a sudden it was like, let's do this thing. Well, we're working on other stuff. These two people. So they were like, we'll do part-time. Right. And I think that's kind of like famous last words. Like if someone's going to be part-time, you have to set really, really clear expectations about value, all this other stuff. And these guys were both like, you know, in the space, they're like a decade older. So I just kind of made a lot of like naive Midwestern assumptions. And I don't think anyone was nefarious or at least like, it's so much better to think of it. Cause you know, they've been in the business the whole time they're on our board. Like they were never like full-time in the business, but I think that was like, Something that would have saved a lot of like, um, like a lot of calories and just a lot of frustration was like setting really clear expectations because we messed up like the equity struc…

AI assessment note: “we messed up like the equity structure. We basically were like, well, we're all co-founders”