In this episode of Startups For The Rest Of Us, Rob talks with Matt Wensing about his exit from his company Riskpulse, dealing with multiple investors, his new company Summt, and why forecasting is crucial.
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Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. This week I chat with Matt Wensing of Summit and of Riskpulse, a SaaS company he ran for 15 years before selling it earlier this year. We dig into his journey, building it to multiple seven figures, finding a CEO and replacing himself in 2019, and then selling Riskpulse in 2020 for a life changing sum of money, then moving on to Summit which is a tiny seed funded company.
We also dig into forecasting because Riskpulse and Summit are both forecasting engines. Riskpulse did it for logistics, and Summit does it for SaaS companies, and recurring revenue companies. Super interesting conversation, Matt is just sharp as a tack, and has a really deep insight into forecasting, and how it works, and why it works, and when it does, and all that stuff.
I enjoyed our conversation. I hope you do as well. Before I dig into that, I wanted to call your attention to MicroConf On Air. Go to microconfonair.com. It’s a daily live stream that I’ve started doing. It’s 30 minutes every day at noon Central Time, and it’s an idea that we came up with the MicroConf team to try to connect people together. Really, right now a lot of us are essentially in our homes 23 hours a day and a lot of us have kids at home as well.
Even though if you’re used to working from home, it’s still such a different situation now, you can’t go to coffee shops in a lot of places in the world. We just can’t do the normal things that we’re used to. I started doing this live stream. I’ve been really enjoying it, microconfonair.com if you just want to watch it, if you want to be involved with it you go to microconfconnect.com and apply to be part of our Slack group. Once you’re in the Slack group, then you can ask questions.
I’m hosting Q&As. I’m hosting happy hour typically on Thursday or Friday. We’re doing some video rundowns where we actually watch MicroConf talk videos from 2019 with different founders. This week as this episode comes out, we’re going to have Craig Hewitt from Castos, we are going to have Ben Orenstein from Tuple. The idea is that we release their videos, and you can watch them a day or two in advance, and then you can ask them questions about their talk videos or about anything about their story.
I’m pretty excited about it. It’s the first time we’ve ever embarked on something like this, so we pulled it together very, very quickly, over the course of about 24, 48 hours. The first live stream was supposed to be 30 minutes and wound up being about 9 minutes before the stream crashed, but since then, things have been going really well. I’d love to have you join us there at microconfonair.com. Let’s dive into my conversation with Matt Wensing. Matt Wensing, thanks so much for joining me on the show again.
Matt: Hey, thanks Rob for having me on again.
Rob: Absolutely, man. I talked in the intro about you growing Riskpulse, finding a CEO, and selling it. I always ask people who had these life changing exits what was it like when you looked at your bank balance, you hit refresh, and you see all those zeros for the first time in your life?
Matt: I think for me it was a huge relief just because the sheer number of years that I put into it, it was not a, hey let’s bet the summer on this. It wasn’t quite the farm. I didn’t go that far like if it hadn’t happened, things would have been okay but I was very invested in it. It was a huge relief to see that definitely, as you said life changing. Obviously, life improving, but really just that peace of mind that you don’t have for sometimes a very long time in startups.
Rob: Indeed. It was a really long journey for you, right?
Matt: It was.
Rob: Was it 15 years?
Matt: Yeah. I had the idea in 2004. I went from idea in 2004 drawing little notes and posted notes on my lunch hour while on break as a software developer thinking, hey, steps one to four of starting a startup let’s do this. 15 years later.
Rob: Congratulations, man. Did you buy anything? Did you buy a Porsche, did you buy a house?
Matt: Yes, I did. I did a couple things. We’ve been postponing a great ski vacation for a long time. It happened in December and guess what? It was time, so I took the kids. It’s something I’ve wanted to do for years, just take the kids on a ski vacation. We last minute booked all that, didn’t worry as much as we normally would about the last minute rates. Went up to Whistler, Canada and had a great time with family, inviting family to come join us.
That was great. I inherited a car from my parents a few years ago just because they didn’t need it anymore. I was like, okay, extra commuter cars are always helpful, especially when it’s paid off and was able to get rid of that and get a new vehicle which felt great.
Rob: Very nice. There’s a podcast called the Tropical MBA. Dan talks about the Entrepreneur Mobiles. It’s basically that cheap piece of […] that you drive while you’re trying to build your company because you’re not actually making much money. I drove a salvage title 2006 Buick Rendezvous that at one point had a bunch of duct tape, the mirror got hit. I drove that up until a year after I sold Drip.
I like that car. Then, the next car I bought was a nice car. It’s a Volvo. It’s the nicest car I’ve ever owned. In fact, I still bought it used though. I couldn’t bring myself to buy a new car.
Matt: That’s funny. We had the 2005 Toyota Sienna minivan which we put 215,000 miles on as a family. We replaced that with a modest, functional SUV, but then I had inherited a car from my parents, that was in 2004, and it worked. It was fine. It was exactly what you described. It paid off, and worked, and got me from place to place. I traded it, and I did get an off lease vehicle because again, I didn’t want to pay the depreciation, but it’s a lot more fun to drive.
Rob: Once a scrappy founder, always a scrappy founder. It’s hard to change it. I want to ask you about a couple things. One thing that you did that was super interesting with Riskpulse is you build the SaaS app to multiple seven figures, and then you replaced yourself with a CEO. You moved on to start Summit, which we’ll talk about towards the end of the interview.
It’s very unusual. Most people don’t go through that experience. Most people aren’t able to find a CEO. It’s not even on the radar of a lot of people. What was that process like and why did you take that step?
Matt: It was a process, I think it was the deciding that he was going to be CEO was definitely the last step in a mental journey that started when we needed an experienced enterprise sales executive to join the team. I had a recommendation from a board member, which is a great example of how board members can be value add, and is helping you find top talents.
In this case, he knew him professionally, they worked together before. It was somebody that had significant experience building companies from the few million in revenue to the next phase, the 10 employees to 100 employees phase, which is a great fit for where we were. I initially hired him to be Chief Strategy Officer, which is a fancy way of saying not quite sure what your title is going to be, but I know that you have a lot of experience and we want to just get you involved.
The first thing he did was really focused on sales and overhauling the sales process. It’s an enterprise sales process. Even though I had more experience in the business, of course, because I’ve been doing it for years, he brought in that outside experience and revamped our sales process, professionalized it. That was the word, he was really going through professionalizing each function in the company.
After sales, it was marketing, and customer success, and fin ops, and all down the list. Lastly, we just got to the point where it wasn’t that I didn’t want to manage him. It was more what’s in it for me? Why do I want to hold on, because it was clear at that point that he could be CEO, and that I didn’t need to be, so it was an either, or. Without any forcing from the board, this was completely my idea.
I said I never intended to run this company forever, that was not my identity. I think that was the key decoupling that was already true in my mind and heart was like who I am is not the CEO of Riskpulse. It’s the founder of Riskpulse, maybe a little bit more, but the CEO to me was always a title that could be changed at some points, and I always intended to change it at some point.
It just became a really natural transition to say he’s that person now. Announced it to the board. The board was a little surprised at my willingness. It was almost like what you said. This doesn’t usually happen, and it isn’t usually peaceful when it does happen. I think that should be the goal of maybe more of us, a peaceful transition of leadership and power. That’s an important tenet of a well functioning organization.
I was happy to do it. It just immediately freed me up to focus on just the things that I was world class at, and still wanting to focus on, and then ultimately wind myself out of the business.
Rob: When you work on a business like that for 15 years… In your shoes, I would have grown tired of it, probably quite a bit before that. I’m not putting words in my mouth saying you grew tired of it, but we as founders, as entrepreneurs, we like to build new interesting things. It’s sometimes hard to do that once a business is as mature as Riskpulse was.
Matt: There were some elements of that which was, I was functioning well, but the reality is my superpower if I have one is doing new things. Once a company gets to a growth phase where it’s about doing the things that are working more and more and less about creating new things that add risk and add new variables to the equation, I wasn’t getting to use that superpower as much as I even wanted to.
It made a lot of sense for me to either A, find a different role in the organization. For a while I was chief strategist, so I just gave myself a new title and said that gives me a little bit of freedom to figure out what I want to do and see where I can add value to the organization. But like I said, once you get in that growth phase of let’s do more of what’s working but faster. It’s not the same. It’s not the same job.
Rob: I think one of the really savvy benefits or one of the pros of doing it is that when you sold Riskpulse just a month or two ago, you weren’t forced to stay on and work for someone else for a year or two. The turnout wasn’t there because you were so unaffiliated, but you just weren’t actively working on the business day to day.
Matt: That was just a coincidence. I wasn’t attached, like you said. I wasn’t mission critical might be the right way to put it. I was there as an advisor and a board member and clearly had a lot of institutional knowledge, but at that point of vision and the leadership and everything had been transferred over to the team. I was just a just a shareholder at that point, obviously, a huge fan.
Rob: Before we talk about your next act, which is Summit. I just have a question or two about the exit itself, about selling Riskpulse. I’m going to assume what was the emotional high, and I’m just going to put words in your mouth that it closed. It was the relief of everything being done and 15 years of hard work paying off, is that accurate?
Rob: What I want to hear now is there’s so many lows in these types of acquisitions and stuff goes sideways. Most of the time during the long process, a lot of stuff goes sideways in the last week. Every time that people think that buying a house is stressful or selling a house is stressful, this is 10 times or 100 times, nothing is standard.
There is no realtor document that everybody uses. It’s just a big argument fest is what it felt like to me. I’m curious if you could talk us through a point where you had your head in your hand and you were thinking this isn’t going to happen.
Matt: I carried that thought in my head. I would actually have to say until the wires were done. Almost to the point of absurdity, except I was not disappointed. What I mean is I always had that thought in my mind, this is so fragile. It’s always fragile until it’s finished, and I think that’s the way with all deals. Time is the enemy of all deals.
To make a more concrete, Riskpulse at that point like we said, we incorporated in 2007, but we had raised money in 2012 and 2013. Because of that, we had a number of shareholders on the cap table that was not your typical three investors, and that was it. There were a lot of stakeholders at that point. I definitely had my role in the transaction which was hey, Matt, you’re the one that raised money from all these people.
You have relationships with these folks, and we need somebody to be the spokesperson. Obviously, being a board member, that was my role was reaching out to all these folks that had some stake or some ownership in the business and let them know here’s what’s going on, and here’s what’s next, and here’s what we need you to sign.
When you need to get X number of signatures to have something go through, even if everything makes perfect sense to you. Just the simple act of needing to depend on the signatures of 10, 20, 30, 40, 50 other people, it just creates a lot of extrinsic risk of somebody could be sick right now, somebody could be on vacation for three months, somebody could be no longer in the mood to do this, who knows what. I’d like to say I had a close relationship with everybody at some point, but years go by and you’re not really sure where everybody’s at.
There was always this risk there in my mind of who knows what’s going to happen? I think for me, the worst was the week that the deal was supposed to be done was the worst because you’re landing the plane. Most accidents happen when the plane is either taking off or landing. Needing to see the green lights, if you will, light up one, two, three, like sequentially just see everything go through was very nerve wracking.
I kept telling my wife something’s going to happen, something’s going to happen and then I will get into detail like there were weeks where things did happen. Thank goodness, had a great team. We had reasonable acquirers, great lawyers, and everything worked out. It was not just smooth like you said, hey, check here and sign here and everything’s done. It was an orchestration. You’re just hoping everybody does what they’re supposed to do.
Rob: There’s that many parties involved. It does get complicated. Did you regret raising money or raising money from so many investors, because it brought that complexity on the exit?
Matt: Yes. I didn’t regret raising money for sure. That many though, yes. That’s not something I’m going to do again. A lot of it was just when you need money, and you’re first starting out your first company and somebody offers you small angel investments, you take it. When you’re looking for wins and need to pay the bills and all that, you take it. It’s not like something I could go back and just decide to do differently.
There are ways now to improve that. One of them obviously, is when you have a lot more credibility. You have the luxury of maybe doing things differently. The other part is now we have things like angel syndicates, and ways of bundling investments. There’s a lot more seed investors too who will just say you don’t need to raise $5000 from 10 people, I’ll just write you a check for 50 grand or 100 grand. That wasn’t as common in 2010, 2011 and 2012, as it is now.
I don’t think I could go back and actually do it differently, but the second time around, I definitely will be doing some things differently just to decrease that risk. That’s just inherent in having a lot of stakeholders. Not that any of them are controlling, but it’s simply just a matter of the more servers you have running, the more likely that one of them is going to go down. It’s that kind of thing.
Rob: Yeah. Like you’re saying, your first one you have to do what it takes to keep the servers on and to pay the bills. It’s an interesting thing. I’ve made some decisions like that that wound up coming back to bite me years later, but I never regretted them because they were the right decision at the time. I wished it was different but there’s oftentimes nothing you can do.
Rob: Let’s talk about your transition from Riskpulse to seed the idea of Summit. Summit’s at usesummit.com if folks want to check it out. Your headline is great teams forecast early and often, upgrade your gut feeling to forward looking metrics. Riskpulse was weather prediction and logistics prediction. I think you mentioned last time you were on the show that a friend of yours jokes with you that you’re a one trick pony that you take prediction and you just moved it from niche to niche.
There’s a lot of analytics providers. We can go to Baremetrics, ProfitWell, and ChartMogul, there’s a bunch of stuff. Even Google Analytics, although doesn’t have anything to do with revenue. There’s Stripe dashboards, there’s all this stuff. What made you come up with the idea for Summit, and why build another analytics provider?
Rob: Great question. I was running a SaaS business with Riskpulse and I had some metrics. I would say that some of the tools you just mentioned either weren’t there or we didn’t adopt them early. Our metrics were harder to put together than just looking at ProfitWell, or Stripe, or whatever dashboard. The problem I set out to solve wasn’t having analytics, per se. It was that I’m getting asked hard questions by investors and my team about how the business works, and how the business would behave if we changed something about it.
That’s something where, yes, you can look at a chart and you can definitely look at a history and it tells a story. If you’re good at interpreting the data, you can tell the story of why your MRR looks like it does or ARPU or whatever. But this was more of a what if question of not what happened, but what would happen if we did this or we did that, or what’s going to happen if we do nothing?
It was always about the future because I spent a lot of time fundraising with Riskpulse. Those questions are just really hard to answer. When I want to answer them, the metrics on hand were a great starting point, but they didn’t give the answer that people were looking for. We all know the tale of the hockey stick, a founder left alone in a room with a Google spreadsheet will exit with a hockey stick of some kind, if nobody’s checking and balancing that.
That’s not what I wanted. I wanted something that I could use. Ultimately, as a business, we did end up building a fin ops team. That was really a game changer in terms of now we’re managing the business through the lens of how we’re performing, and how we think we’re going to perform over the next 12 months. I said this is super valuable, but it’s something that most people can’t hire two or three headcount to focus on, or a CFO.
The challenge for me was how do I productize that value, which is really about forward looking for the sake of making decisions today that have an impact tomorrow. That was really the genesis of it.
Rob: It’s interesting that you’re catering both to investors and also to startups. How are you thinking about that?
Matt: Startups need forecasting and we can talk about the use cases for that and why, but one of them that comes up again and again, is when potential investors ask for these things. If there’s ire and some groaning about the realism, or the likelihood of these forecasts being true when startups make them, investors that receive these things, it’s easy to make fun of investors and a lot of people like to do that.
The reality is like good investors don’t want unrealistic or silly projections either. I know that everybody thinks we want that slide that has everything up into the right, but a good investor, especially one that’s thinking about sustainable, profitable businesses, which is an investor that’s more common these days, really wants something that is defensible and rigorous. The big thing is consistency.
I think for you, Rob, if you had to look at 10 different ways of presenting metrics and 10 different ways of presenting a forecast every month, it’s just way more overhead. For me, it’s a convenience service for the investor. I think in the future, it will become something more of an analytical engine for them, but for now they love the consistency of it.
I’ve had more investors say that they’d be willing to essentially tell startups, hey, when you send me your metrics, can you send me the Summit URL instead of a spreadsheet that you create today, because it’ll have everything I want to need. Frankly, it’ll be a little bit more professional than probably what you put together in a crunch.
Rob: That was a field we actually had in the tiny seed batch two applications. “Do you Summit?” Put your URL, your shared URL in here. When folks sign up for Summit, they just connect their Baremetrics, ProfitWell, ChartMogul, or Stripe accounts. Then it just pulls in all the stuff that the backwards looking data, and then Summit does forecasting based on that. Is that accurate?
Matt: Yeah, exactly. It generates a trend cast, as I like to call it, of all that data, which basically says you’re moving in this direction. This is how things are likely to keep going just based on almost thinking of it like inertia. That’s just helpful to see what direction the business is going. That’s the initial reality check of it is that as entrepreneurs, we can be incredibly biased towards what’s happened last month.
In other words if last month was great, we feel great and we think everything’s going to just keep skyrocketing. If last month was down we also sometimes think that the sky is falling. That piece there is really meant to do some just initial resetting or setting of expectations for everyone.
Rob: There are a lot of folks you mentioned if you’re going to raise investment, oftentimes investors will ask for forecasts. A lot of folks in the audience are not going to raise investment. They’re going to bootstrap. What’s the benefit there? Why should they think about looking ahead 3, 6, 12 months and trying to figure out where their business might be?
Matt: There definitely is also application there. I actually think of it in two ways. One is if you’re in the default dead stage, which if everything continues, like it is, essentially, this business is going to run out of money, then the clear one there is there’s nicer phrases, let’s just call it the drop dead date. What’s the date where this thing runs out of money? You can do that with a simple calculation that just says take the bank account balance today and withdraw a certain amount each month, if your business is that stable.
It can help with that. Cash forecasting and runway forecasting would be the primary use case for a default dead “startup” even if you don’t plan to raise money. You’re just trying to get to profitability. The next one is like, okay, when are we going to get to break even? That’s what so many bootstrappers are obviously striving for is, when am I finally going to get to that X k a month that makes this my full-time job or makes this my long term occupation.
Getting a sense of that, and really, with the forecast and the way it’s done in Summit, the benefit is you can run that calculation, and you can get a different number each time, depending on the assumptions that you make. If you assume that your close rate is 25%, maybe your breakeven date is seven months from now. But you probably don’t have that level of confidence in your close rate, like maybe what you want to say instead is I don’t know, my close rate is probably going to be somewhere between 15% of 30%. You look at the independent SaaS report and you just saw Rob, and you’re like at some point, it’s like, what’s the benchmark for these numbers?
Let me just assume a range. Well, what happens if your breakeven is maybe 7, but maybe it’s 12, just helping to get an understanding that the future is uncertain. We don’t forecast to be precise and certain about things. In some cases we forecast to accept, or maybe come to grips with the variability in some of these things.
It’s like a five month difference in breakeven. It could be huge. When do I actually want to quit my consulting gig, or when do I actually quit my job, or how much emergency savings do I really need? Those are all big decisions that you make, even if you’re not fundraising.
Rob: I was thinking I could have used this with Drip, we would grow by $5000 MRR and then I would be like, okay, now I have enough money to hire a customer success person or support person. Then we grow by $10,000 and it’s all right, now I have the money to hire a developer. It was always once that had happened, then I would start the process and then it would take two to three months to hire that person.
If I had some inkling, and like you said, it’s not an exact prediction. It’s hey, in the next 30 to 60 days or whatever, you’re going to be at this level where there’s that much more profit.
Matt: That’s the use case, definitely on the default to live, and maybe still living off of your revenues and not fundraising as we know that hiring takes time, knowing that you’re very likely to have the revenue that you need to support that person ahead of time. Absolutely, getting ahead of hiring is strategic.
Rob: As I think about prediction and forecasting, I have almost no exposure to it other than looking at the weather on my iPhone all the time because I live in Minneapolis. How accurate can you get with something like this, because I have to imagine there’s some skepticism. If you look at any random metrics provider, and the revenue is going up into the right gradually and then there’s today, and then it just keeps going up. It’s just a linear extrapolation on what’s going on. How is Summit different than that and how accurate can it actually be, crazy randomness of startups?
Matt: I think you’re right. If you just take a trendline, which is what we’ve been talking about so far. I think that numbers don’t really understand the business in the way that we do as entrepreneurs. We can look at that line and see it going up into the right. We have a lot of intuition that that’s not right. That’s wrong, for some reason, and is a straight line better than nothing like maybe.
A trend is probably better than nothing, but where it really gets interesting is when we use more than one method of coming to that conclusion. Folks can be scientific. If you think about a scientific theory for example, where you can start to have more confidence in something is when you make observations, and they both confirm or corroborate a theory that you have.
It’s like we measured this thing, we took the temperature, and we also looked at the rock formations, or whatever it is, so you take geology and meteorology, take a bunch of different scientific disciplines. You look at all the evidence and you say, wow, the evidence from all these different fields says that this probably happened. It’s like we’re used to other domains as scientists, but we don’t think of it in terms of startup. What the heck does it have to start up?
Think about it this way. Statistics is one thing like your revenue is growing at 5% month over month. Therefore, this is what your revenue is going to be in December. You need another method to check and balance that and say that’s what this method says. If you just use arithmetic and linear growth or compounding growth, you’re here.
What Summit also does is it brings in simulation, and simulation is different because it’s not machine learning in the sense of like looking at a bunch of data, and finding patterns and coming to a conclusion. It’s simulating the life of your business. I always like to give this example like revenue might go up into the right if you just do a statistical outlook like 5% every month. You’re going to be here by December. It’s like, yeah, that’s great.
What the statistics don’t know is that you don’t have the cash to keep hiring salespeople, or you don’t have the cash on hand to keep spending on paid acquisition, which is how you’ve been growing revenue so far. The simulation is very useful, because it will look at your cash balance, and you can almost think of it like reconciling things. Revenue can’t keep going up if we run out of money. At some point, your engineering team is going to be so busy with the current feature set that they’re not going to be able to roll out features as fast. Stuff just starts to change over time in a way that a purely mathematical view doesn’t understand.
What the simulation does is it actually does run through those different kinds of dependencies of saying your sales are dependent on hiring salespeople, your cash balance does not support you hiring another salesperson in three months. Therefore, you’re not going to keep adding revenue. However, if you want to keep adding revenue, you should go hire a salesperson. It’ll give you a recommendation to go hire a salesperson. That to me is where it gets a lot more realistic. The evidence of that is if you run through a bunch of forecasts in Summit, it’s actually hard to get the thing to draw a hockey stick. It’s like you need a lot of things working really well to do that. Whereas, if I left you alone with a spreadsheet, you could come up with a hockey stick in five minutes because it’s just wish casting.
Back to the point, I think your confidence can go up, the more different ways you have of forecasting and seeing those line up. I’ve seen some startups where it’s like the statistical trends are very consistent and high confidence levels. If you put all these assumptions in the simulation, you get a very similar result. That’s the business that has figured out its business model. I think you can put a lot more confidence in that than somebody who’s like I’m not certain about my pricing, I’m not certain about my close rates, I’m not certain about et cetera, et cetera. That’s where all this risk comes from in our forecasting is we ourselves don’t know what tomorrow is going to hold.
Rob: That makes sense. The simulation, is it a Monte Carlo simulation?
Matt: Yeah, it is a Monte Carlo simulation. It’s a Monte Carlo method. If we want to geek out for a second, and I’ll keep a high level, it’s a simulation in a way of stepping through time and making decisions, but the decisions that it makes do use Monte Carlo methods, which is really a dice roll. I like to use examples of D&D players will love this, but anybody that plays games. Basically, the simulator rolls dice many, many times every month to decide what happens next. The shape of those dice, if you will, depends on your business. I’ll just leave it at that.
It’s a bunch of randomness that gets inserted too, and the randomness is helpful because then the output is a range of possibilities, not just one possibility. You can see some cool stuff like, wow, there is a big spread in terms of where we’re going to be in 12 months. How do we tighten that up so that we can be confident that when we hire this person, we’re able to keep them hired into the future?
Rob: The fun part is all the TinySeed portfolio companies are using Summit. I’ve talked to a few of them who say that they go in and it’s like a little toy. You’re like, I’m going to change this assumption and see what happens. I’m going to change that assumption and see what happens. If you do like to nerd out on your own SaaS metrics, which I will raise my hand and admit. I’ll be the first one to admit that I would check revenue constantly, and MRR growth and all that stuff when I was back in the day. It’s something you can really geek out with.
I really like that you pointed out that trying to get a hockey stick is really hard, like a ton of things have to come together because that’s reality. That’s why so few businesses hockey stick, and when they do, it’s because this creates hard work, and market timing, and then a little bit of luck, and you did some things right. It’s all this stuff has to come together for that to work.
You talk to any founder who’s done it, I believe if they’re being honest with themselves, it’s a lot of factors. It’s never like, oh, I was really smart. It’s always this, this, that, and this, and I happen to time right as this technology took off, and SaaS was becoming a thing. Or, the iPhone had just come out, et cetera, etcetera, et cetera. It just goes on. I think that’s cool.
Matt: I think that the challenge I might have for folks is the thing you’re working on right now, like the feature you’re about to launch, the marketing campaign you’re doing, have you had the time, or giving yourself the time to really predict I’ll say or decide what the impact is going to be to your business? You’re working on that feature because you think it’s going to improve retention. Let’s run with that for a second.
How much? Maybe you don’t know, maybe it’s just a little bit, maybe it’s a lot. Have you run the numbers against your business and said if this works, and then improves retention by X percent, where are we 12 months from now? Compared to maybe not doing it at all, or doing something different.
My dream scenario is when people get together to decide what they’re going to work on next. Imagine running a unit test, if you will, of your financials, your business, and saying wait a minute, if we work on this for a month and it only improves retention by 6%, that’s not going to help us hit our annual revenue target. Imagine deciding that that’s not the right thing to work on right now because it just doesn’t move the needle. Even if it goes exactly as you want to, and customers receive it the way that you expect them to. If it doesn’t move the needle, should you be working on it next? I don’t think most of us have the luxury of doing that analysis, but I’d love to make that really easy for folks.
Rob: As we wrap up, I want to call out one of the reports you have is a survivor curve, and it’s like the opposite of a cohort churn grid. If you’re listening to this and you run a SaaS app and you’ve never seen a survivor curve for your app, I would really encourage you to check this out. You can go to usesummit.com, and you have a free plan so people can log in, and you just connect your Stripe analytics. The survivor curve shows, I believe it’s by cohort, how many people stick around after X months. It’s this long line, it’s like after one month you have this many left, after six months this many left. If that curve doesn’t flatten out somewhere, you have a problem. Would you agree with that sentiment? I would hand build these for Drip until we can get the code to do it. It was quite complicated, actually. I would sit there and stare at that thing, and you want it to flatten because going down in essence, because it’s how many users you have remaining from that cohort.
You want it to be as shallow as possible, meaning it goes down just a little bit and it flattens, but most startups it’s not that. It just winds up being this gradual, gradual, gradual, and if it ends up going asymptotic to zero, and it really never flattens out, then you can grow a decent sized business but trying to get into many millions of dollars, you’re going to have a really, really wide funnel at the top to get there.
Matt: Yeah, that’s your foundation. The way I think of it is if that curve stretches out to zero or 2% sometimes, maybe they stick around. You’re building on quicksand and you’re just trying to build that sandcastle if you will, as the base is eroding, is almost impossible. Seeing something where 30%, 40% of your customers stick around almost “indefinitely,” that is the foundation you need. I agree, it actually is all of your customers from all your cohorts, so you can look at these in Baremetrics or Stripe. I know and see like out of last month’s sign ups etcetera, how many stick around. This is actually looking at, in aggregate, across all subscriptions for all time, how long does the average signup stick around? It’s foundational.
Rob: Sounds good, sir. Thanks again for coming on the show. If folks want to hear you talk for about 45 minutes every week about what you’re up to from the maker and manager side with our good friend, Peter, they can head over to the Out of Beta Podcast. You’re @mattwensing on Twitter, where you’re pretty active, and you have some good thoughts you’re sharing on there. I encourage folks to check out all the stuff Matt is up to.
Matt: Thanks so much.
Rob: If you have a question for me, for Matt Wensing, really for any guests that we’ve had on, you can email email@example.com, attach an audio file, it’ll go to the top of the stack. If you send it in text, obviously, I will read that as well. You can also leave us a voicemail at 888-801-9690. Subscribe to us by searching for Startups in really any of the pod catchers.
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