Startup and Scale-up lessons from a 5X founder

A five-time founder and a two-time CEO David Cancel, knows a thing or two about building and scaling companies. 

Best known for creating hyper growth products and product teams at companies such as Drift, HubSpot, Performable, Ghostery and Compete, David says, for him, it has been less about starting a company and has been more about learning.

A lifelong learner, David focuses a lot on creating an internal culture of great storytelling at Drift because he believes that as the world shifts, companies also need to change the way they talk about what outcome and experience they offer. In a fireside chat with Chargebee CEO Krish Subramanian, David shares his learnings and insights from his over 20 years of experience in building high-growth businesses

Always ask, ‘Why Now?’

David says the most critical question you need to think about when it comes to creating any product or starting a company is that Don Valentine, the founder of Sequoia, would ask, ‘Why Now?’. “Almost no one answers that. You have to hammer that down. Most entrepreneurs never ask themselves that question. They are caught up in self-actualization that I have an idea, and I want to create this company. They never stop to think why now,” he says.

Before starting a company, you need to understand the behavioral and technological changes that enable change. People using online for enterprise sales is a trend that’s undeniable because we have seen a massive shift, and we can see that in the numbers.

Those are the reasons why you should create a company. According to David, this is probably the best time to start a company since we have seen a massive behavioral change on a scale during the pandemic, and there will be lots of demand for new products and services. 

It all starts with the story

We are obsessed with storytelling and how we can do a better job at storytelling. So we train on that a lot internally. We didn’t start by telling the Drift story but the larger story of why it’s happening now and why some mega trends are undeniable. We created a category called conversational marketing. And we went into it with the right thought and mindset but what worked well was that there was also a paradigm shift towards messaging and chat happening in the world.

We didn’t set out to create a category initially. We were trying to put words into a story because we communicate through stories. Before we talk about the market opportunity or start to think about the product or strategic positioning, we begin with the story. Your story needs to showcase the value people can get out of your product or service. Once everyone is crystallized on the story and can tell the story, we move on towards the positioning. 

Leverage technology to remove friction

The pandemic has accelerated digital transformation by a decade. Enterprise companies who otherwise relied on physical events, offline marketing, and visiting customers had to adapt and shift to digital, which has opened up many new opportunities. “The global pandemic has been the catalyst for the biggest shift in buyer behavior in any of our lifetime. There has always been a sub-segment of the markets that didn’t fully embrace digital transformation, particularly in the higher-end market. Many of them thought it was impossible to sell a million-dollar sale.

Now with the pandemic, the same deals get done without face meetings. There is a massive behavior change from the buyer,” he says. The world has shifted, and everyone had to embrace the digital reality we lived in.

David says the one thing that the internet has done is to remove friction “As entrepreneurs, we always need to think about how we can use technology to remove friction from a process.”

Commoditization is not a bad thing.

 We are so afraid of commoditization, and because that’s when you get disrupted. So most entrepreneurs ran away from commoditization. But commoditization means there is a large market because you don’t have a massive demand for a rare product. “The trick is finding out whether you can resegment or reposition a part of the market, so you continue to innovate and take market share within that market. You’ll win every market if you can reach your customer and service them better.

Companies need to start worrying if the rate of innovation slows down and the market gets commoditized. That’s when problems happen. Another thing that one must be wary of is playing in markets where there are no competitors. Because no competition, usually the market opportunity is not large enough 

Moving upmarket

For an organization, moving upmarket is one of the most challenging changes it can go through. But it is also the most exciting transformation because it is also the most rewarding when it starts to work. 

 But I will not discount the pain of moving upmarket. The bigger you get, the harder it is. We are about 400 people right now, and we were about 20 people in 2017. We went through so many process changes, packaging changes, and product changes. When we started, we were a touch-less freemium only model, then we moved to inside sales, SMBs to mid-market. Now we are across all those segments but more heavily into enterprise. It was never really the intention till the market pulled us up there. That required the biggest change ever.

My advice is to make it a progression. Even though we did that in a short amount of time, it was a clear progression. Many companies that are selling touchless or a $50 product want to move to enterprise tomorrow. And that’s too drastic to try to move too quickly without any validation from the market. You need to march your way up. Most of us sell products that can land and expand in larger organizations, but you need to wait for the market pull.

Be a lifelong learner

As an entrepreneur, you will learn through pain and failure that ego will get in the way at times. And even if you are not an entrepreneur, your personal growth can be stopped by your ego, which gets you in a state that lets you think you know more than you do. You stop taking feedback from a friend or coach or the market, and the learning will stop.  

At every stage, the company requires a different version of you. As the company scales up, you need to create more impact rather than being more productive. In a fast-growth company, you go through multiple stages, so either the company outgrows you or you outgrow the company. When you outgrow the company, there aren’t too many growth opportunities, in which case you get bored when the learning stops and move out. When the company outgrows you, your growth plateaus and promotions are hard to come by.

When these mismatches occur is when change happens. You should be thinking about and expecting those changes. When the company grows faster than you, you can restart your growth by learning from the next wave of leadership and starting to pace your self ahead of its growth again.