Data Council Week: GTM 101 for Engineers with Chase Roberts of Vertex Ventures

Eric Dodds 00:03
Welcome to The Data Stack Show. Each week we explore the world of data by talking to the people shaping its future. You’ll learn about new data technology and trends and how data teams and processes are run at top companies. The Data Stack Show is brought to you by RudderStack, the CDP for developers. You can learn more at RudderStack.com.

Brooks Patterson 00:23
Chase, great to have you on The Data Stack Show today, we are here in person at data Council Austin, which is so exciting to get to record some conversations in person instead of over a zoom. I’m Brooks I’m filling in for Eric today, he did not get to come to the conference, he got in a little bike accident. He’s okay. But wasn’t able to make it. So you should stick with me today. But Chase, so excited to have you on. To kick us off. Could you tell us a little bit about your background, kind of how you got to where you are today and what you’re doing today?

Chase Roberts 00:56
Sure. So I grew up in a small town in Oklahoma, where the primary industry was not venture capital and more was a technology, it was ranching. After college, I went to went to work in the finance industry for a bit did some work at an investment bank and an alternative asset manager, and did that for a couple of years and then realized, moving numbers around on spreadsheets wasn’t the most exciting thing in the world to me. And by this point, I had become aware of this place called Silicon Valley and this idea of tech based entrepreneurship, you know, growing up that you’re the idea of someone starting a company, and that product reaching the world was just like, totally a non thing. And I started become aware of this and decided, like, I want some of that. And so I quit my job, you know, Cold Turkey had nothing lined up and figured out I was gonna get to Silicon Valley somehow and shorten the story. So we don’t sit here and dwell on it forever. But, you know, I sent a cold email to a software company called Box. Because I read a book by a guy named Clay Christensen called The Innovator’s Dilemma, and I found a video of him speaking at an event for this company. And I was like, hey, anyone who does this guy on stage, they must be doing something, right. And yeah, that led to my first job in the valley and drove on to U haul with my wife of three months who probably thought I was crazy. Enjoying the company sight unseen. And, and that kicked off, you know, that kicked off my career. The valley, I joined Vox early spent half a decade there on the go to market side and wore a bunch of hats on the rise from, you know, we all still fit in a room to public company. After that went to a software company called segment where I joined as a first hire for the BD team and help grow that and build that function and then got into venture capital about four years ago. And so today, I’m an early stage investor investing in mostly technical founders to seed in series, a stage and living the dream.

Brooks Patterson 02:59
Yeah, that’s awesome to before, kind of before we hit record, you were just talking about your role now. And especially I think working with technical founders is kind of, hey, let’s really do some research and find the best products, what’s your background is on the kind of go to market side, and you’re talking about even some lessons you’ve learned as an investor about the relationship between the product and kind of the go to market motion? You just unpack that a little bit for us?

Chase Roberts 03:27
Yeah, happy to. So I think that one of the most common failure modes we see among founders is they don’t think of go to market, or the commercial side of their business as part of product development. The idea that I think a lot of founders will pursue is they look at the problem that needs to be solved. And they try to build, you know, an elegant solution to solve that problem. And they’re actually not wrong. And doing that in the sense that you’re building deep empathy for this problem. And trying to like build a really great solution to it is actually the thing to do. And that’s half the battle. The other thing that you have to do is figure out like, how do I get this out into the market. And your product isn’t just how, like what you’ve built, it’s how your customers come to realize it. And that means understanding how these buyers and users of the technology, become aware that the problem that you’re solving is one that they have. It means trying to understand how they would go about seeking a solution for that problem. So not just what competitors of yours might they look for, but like what are the substitutes? What are the internal, you know, tasks they do to brute force that problem? How would they go about evaluating the solution to that problem? So what are the decision criteria for that and who was involved in that? And then ultimately, like, you know, what is the thing that’s going to compel them to buy and in all of those things are actually part of getting your product into the hands on, have a customer. And I’m going to give some, some very, like straightforward example here, but in probably the most like, rudimentary example, but I think you’ll drive this point home. So for example, if one of my decision criteria as a company for whether or not we can use a product is whether it has something simple, like SO you Yeah, that, that matters from a go to market standpoint, and then also matters from, you know, from a product development standpoint. Now, that’s a more simple example, I think a more like a little bit more difficult. One would be, well, you know, who is the buyer? Like, you know, they’re users of technologies in there are buyers of technology? And what is the thing that the buyer cares about, from an organizational standpoint, when they’re evaluating these tools? And what are the metrics that they’re trying to move within their organization that would actually say, Hey, this is something that matters to me, you know, it’s great if it makes users happy. But if that’s not going to move the needle for the single person who is the single or group or whatever, who’s involved in making the decision, and it doesn’t matter if the user then users like it, and matters if the features, and the value that those features are providing are actually moving that needle for that person, and so, or that group of people. And so I think that like trying to consider all of these things, is really important for actually just building a problem or building a product that people are actually going to buy.

Brooks Patterson 06:25
One of the things you mentioned, was this this kind of thought exercise, do my products and go to market. You just rehash that for us.

Chase Roberts 06:35
So, you know, there’s this, you know, run this thought experiment, if you it’s empirically true. And I think as Peter Thiel, he might have said some version of this previously, so I’m borrowing this idea. But it’s empirically true that you can build a monopoly, selling an undifferentiated product through a differentiated go to market or a differentiated distribution. But if you were to flip that the inverse of that is not actually true. So if I have differentiated product, but the way that I reach customers is completely undifferentiated, it’s completely non unique, then it’s really hard to build a monopoly. And I think, you know, an example the former, I think we’ve come up with multiple examples of commodity products, or undifferentiated products that are just giant companies. I mean, look at oil and gas, look at airlines like, these are exactly the same product all the way through. But if but, you know, if you look at the other example, like, let’s pretend I’ve got the absolute best charger in the world, I’ve built, I’ve got it supplied the best, it charges phones the most quickly, if I’m selling that on Amazon, and I don’t have any edge to reach those users, it gets can be really hard for me to rise above the fold and build a great company there. And there are ways to build great companies on Amazon. But they’ve been able to figure out a way to differentiate what they’re doing among their competitors, among the other people. I think a lot of technologists and a lot of founders will get caught up in trying to build a technically elegant solution, a very sophisticated solution, thinking that if they can do that, you know, in the most excellent way, then that’s going to be the thing that causes them to win. But I think the thing that I think that you’re building a product that solves a problem in having product market fit is a necessary condition, but it’s definitely not sufficient one, I think winning to meet that sufficient condition, winning means figuring out like, how do I win the ground getting how I’ve been the go to market game, in helping get this thing in the hands of people?

Brooks Patterson 08:35
That’s a very interesting, like thought experiment you mentioned to them. You said go to markets and distribution, right? Let’s get a little bit like in explaining the terms. And what’s the difference between the two?

Chase Roberts 08:49
I’m using I’m using them interchangeably. I’m using it as a catch all for you just process taking this thing that’s built in the market to realize it.

Brooks Patterson 09:02
And how does it usually look like when you start? Right? Because you start like the company, you have something in your mind as a founder? Usually, it’s probably like a technology that you have in your mind, especially if you’re like a technical person, right? What are the steps like to start like laying down laying out like strategy for going to market?

Chase Roberts 09:25
So I love this question. Because one of the things that I often see is founders will decide that they will see the importance nailed aside, I’m going to turn this on base, I’m going to put a key in English and turn it on, it’s going to work and they make a decision kind of like in isolation around like, Hey, we’re just gonna get this thing working. And what they’ll do is they’ll say something like, there’s a common phrase I hear is, you know, we’re just gonna we’re gonna turn on product lead growth because we think that the way that this should be sold is like bottoms up. And, and or they’ll say, we’re going to turn on Top Down sales, because the way that we think that we want to sell this is by selling to VPS event. And the problem is, that statement doesn’t actually say didn’t incorporate the language how’s my customer buy? Because the way that you go to market isn’t it really isn’t a function of how you want to go to market, like how you want to sell. It’s a function of how your customers want to buy. And so coming back to the statement I made earlier around, how would your customers become aware that this is a problem that they have? And how would they go about evaluating a solution here, you know, if that means that the way they become aware of it is they go to Google and they search for a tool, they go and test it out. And then they buy it and swipe a credit card independent of talking to anyone in their company, a product lead growth might work for you. If the way that they become aware of a solution is, well, someone has to call them ring their doorbell and send an email, send an email, or send a care package or go to a conference and say, hey, you know, here’s a problem that you probably don’t realize you fully have. Or here’s a different way of thinking about a problem that you’re trying to deal with internally. Let us help like, let us help you evaluate a solution here. And then if there are multiple people involved in trying to make a decision around them multiple stakeholders in that problem, then you’re doing top down sales. And so you’re going back to the question you asked, which is, what are the steps? What is sequencing? The first step is trying to understand the kind of this the problem space, not just your competitors, but just like all the substitutes for this, what this thing that you’re doing? And then try to understand how your customers or your prospective customers would go about trying to tackle that? How would they evaluate tools? How do they typically buy things in this category? And that’s kind of like the first thing as the first set of questions you ask, and you work backwards from that.

Brooks Patterson 11:55
Yeah, that makes a ton of sense. But let’s say you’re an engineer, who is, let’s say, like working in a company like AWS, or meta or Netflix, take any of you know, like, these crazy big companies out there that they build, like amazing pieces of technology, right? And you build something there, right? Let’s say it also gets like open source. And you’re tempted like to go out there and like, build a business around us. You might think that like, Okay, I build it here. So there is like, a user or like a customer internally, right? How close to reality is that? And like, what kind of, let’s say, changing mindset requires like, for, for a person who has gone through that, right, like, because they build something for someone, it’s not like they build it, like, it’s like, from scratch from literally right, like someone asked him and like there is like internal value for these, but probably like this internal value from the exactly like, what the rest of the market is out there. So what’s your take on that? And like what you would say to lease engineers out there thinking or doing something like that?

Chase Roberts 13:09
Well, I think I mean, you know, the good news is, in the case of an engineer that got some sense that there is a problem, and it can be solved a certain way, and they’ve built something that to solve it that way. I think that, you know, the first thing I’d say to him is like, the way that the way that companies are going to buy in, you know, look for technologies and evaluate technologies, like this is not, you know, an internal pm saying like, hey, we need this thing. Or, you know, business leader, you know, calling someone on the, you know, Developer Tools team or something like that, it’s gonna happen in a much different way. And so like, you know, the assumptions that they’ve made around or maybe not even assumptions but like the experiences they’ve had around, like how the problem gets discovered or the solution gets ultimately realized by the organization is not going to be the same when you’re, you know, have a different email alias and actually have to get money to change hands to get them to buy whatever it is you’re selling.

Brooks Patterson 14:09
Yeah 100% I like how like blood person should engage in a lot like learning why do you believe that? Let’s say we have these models like engineers like from whatever Okay, and they get this Mother’s disease out there including You of course like right and they already like to go and attack the market how they’re doing like to learn about that stuff right because okay, like he must take time like to learn it’s not like something that you just like read the textbook and you go and execute right so do you believe that like they should do it on their own first of all, do you think that they should bring towards a sales before or like go to market people it’s like every other everyone to take on these roles like to try like to do that like What have you seen like walking and whatnot?

Chase Roberts 15:03
So I’m gonna, I’m gonna start with an anecdote and then I’ll answer your question very directly. Last night, I was at one of these fun happy hours for the data conference. And I was speaking with a engineering leader out of Twitter, who was starting a company. And he volunteered one of the weaknesses that he’s concerned about themselves. Again, I’m just because I’m a wonderful engineer, he is good, I’m just not comfortable with go to market stuff, I’m just not comfortable to commercial stuff. And what I, the where I challenged them, as I said, Look, if you define the problem that you’re solving, as I’m building this product for this technology, then you will be bad at go to market stuff. But if you expand the scope of the problem to include like, and getting in the hands of people and understanding how they might, you know, consume this technology in their organization, you just changed the, you’ve just changed the problem definition. And now your job is to apply your engineering brain to that, and not just building the technology. And so what does that mean, from a, you know, from a job to be done? If you’re, you know, I fled just like Netflix or whatever company? And I’m, you know, how do I actually, you know, get these learnings, you know, as you’re having those conversations with customers about, you know, the problem itself, and you know, the pains that they’re having the organization, start also asking the questions like, What have you tried in the past? What other solutions Did you evaluate? Who was involved in that, when you’re looking at tools like this? How do you typically evaluate those as a company? What are the metrics that matter that this tool needs to influence? Oh, it’s a constant, oh, it needs to move revenue in some certain way. Oh, it needs to minimize risk along this dimension. And you start figuring out the value metrics that actually matter. And then it kind of gives you a little bit of Northstar like, Okay, well, if I bring this market problem, product to market, I know that these are the types of people who are involved in choosing this tool, I know that this is the types of things that they’re going to be evaluating me against. And I know that these are the metrics, I need to be able to influence to actually earn the right to ask for the order. And so I think it’s so I think it’s just it’s part of the conversations that they’re already having, with people inside. Like, you know, as they’re doing their customer discovery, that every you know, every good founder or every technologist does, whenever they’re starting a company.

Brooks Patterson 17:27
Makes a lot of sense. Okay, so I want to go back to your past, you mentioned that you were doing like business development, that segment, right? Yes. And the reason that I want to build the segment like specifically is because first of all, I’m aware of the products. And I know that when it came out, it’s not exactly like the easiest thing like to go and pitch to someone, right? Like, and also it might have users and buyers that are different, right? Like, I can see that, like I can hear like developers talking about segments, I can hear marketeers talking about segments, I don’t know exactly who’s paying at the end. So you as like a person who is getting in the company and stuff like business developments on that. Like what was the hardest part to figure out the perfect?

Chase Roberts 18:23
What was the hardest part to figure out the perfect dish? I would say that it’s it was understanding the value metric that mattered for the, for the buyer of segment. But so first part is like figuring out who that buyer is, and then understanding what it is that they care about that would actually compel them to open their wallet and buy. So in the case of segment, the people who are downstream to the problem that segment helps with are people using analytics tools. So product managers, people using marketing tools, like yes, HubSpot, and Google Analytics, and Iterable, and things like that. And so at your instinct to say, Okay, well, we maybe we should go sell a product managers, because they’ve, you know, using amplitude Mixpanel, things like that, or we should be using or we should be selling to the people using HubSpot and marketers, and because they’re the ones who are downstream to the data that segments providing. But these aren’t the people involved in implementing and these are the people who are on the budget, people who are involved in implementing segment Miss engineering, and therefore engineering on the budget. So it’s like, well, my pitch that segment is not to the product, people in the marketing people, they’re not even involved in the decision, I pitched a segment has to be something that resonates with the engineering leader. And so then there was a function of understanding Well, what does the engineering leader care about? They care about productivity, they care about keeping their engineers happy, and they care about cost. And so we have to think about what can we do along those dimensions? How can we influence those such that when we make the case, that engineering leader who holds the budget for what the problem that segment solves, that we can actually influence those things for them. And so and we did, we were able to come up with a story along each one of Those because we’re able to say like, Hey, this is infrastructure, you have to build yourself, it’s going to take this long, it’s going to be this hard. Here’s what it would take to do it with segment, it’s fast, it’s less expensive. You know, here’s the boring work that your engineers are going to complain about. Because what you know, the thing that we’re replacing is not rocket science. It’s just boring. You know, you know, boring it reimplementation of collection libraries and SDKs. But now you can just do it once a segment, it’s easier to maintain. And by the way, this,

Brooks Patterson 20:27
you know, that this whole,

Chase Roberts 20:30
do using something like segment means you can dedicate these resources to, you know, other core problems for your businesses, when that realization was there. That’s whenever I think the floodgates open. And so then everything pivots towards top selling engineering, and moving the metrics that matter for them.

Brooks Patterson 20:47
Other playbooks in those market, other like recipes that like someone who’s like a notary, founder, Bigeye, first time founder, also when they haven’t, like tried like to do before, by chance, a lot they could follow? And second question on that, like, how much like people should be paying attention on like, the content of their around that stuff?

Chase Roberts 21:11
That’s a great question. So I think there’s lots of playbooks. But I’ll find one, like one task, or one playbook that I think founders should like hone in on. And that’s customer discovery. And customer discovery, is what it sounds like it’s trying to understand what are the set of problems that basically brought this customer to your front door? Like why are they even talking to you today? What is the business need that matters to them, etc, etc. And the point is like, it’s, it’s part one, which is straightforward, which is to understand, like, Hey, are we a good fit here? Can we solve this problem? Number two is, this is the more important feature of discovery, it’s figuring out if they’re actually qualified, if there’s enough pain involved in here, that they might be compelled to act and buy whatever it is you’re selling. Because, you know, in startup land, the most important asset you have is not capital. Yeah, there’s lots of that. And there’s lots of people like me who are willing to, you know, make investments and make sure that there’s lots of capital available. And as much as there’s not a bank run, sorry, SPV coming out. And the thing, the most important thing that founders like have that is in short supply is their time. And so I think that in the early stages, there’s an outsized importance for founders to make sure that they’re getting the best return on their time. And that’s what customer discovery is doing. It’s helping me say, with confidence that like, hey, there’s real pain on the other side of this zoom call, or this table that is going to cause this customer to be willing to act and open up their wallet, and try to evaluate in tackle the solution. And they’re not just having a conversation with me, because they you know, they heard me on a podcast and think I built a great and elegant solution. And so I think that the thing that I would encourage founders and new company builders to really try to understand and look for content about is that how you do customer discovery really well. So I can make sure I’m not spending time on on the wrong customers. And the last thing I’ll say on this is like, the one thing that every founder guarantee is going to run into guarantee it is there’s going to be that logo that is like the one it’s it’s like oh my gosh, Lyft is talking to me. Or like, you know, Procter and Gamble, pick up the phone, and they’re doing a discovery, call it this guy, or this gal. And they’re gonna think like, oh my gosh, because it’s this great logo, I’ve got to go all in on this. And I’ve got to do everything I can to be a hero and try to get this logo over the finish line. But I’ve seen this over and over again, they don’t do great customer discovery, they get the logo, starry eyes, and they spend time and cycles on this customer with this customer is not there to buy as a more often than not, if they’re like one of these large companies. And it’s a big company big love your time JP Morgan, you’re just the most interesting thing in their day. And so they just want to talk, they want to do something different than the internal meeting, or someone’s going to be pontificating for 30 minutes about something that doesn’t really matter. And they’re just pumped to talk to you and so don’t confuse that for a customer go. That is excited by whatever it is you’re selling.

Brooks Patterson 24:26
Yeah, yeah. Okay, I totally get that. I can relate to that. But I have a bunch of big bucks here. Okay. I’m an engineer like it’s all about like in my career like until today. It’s all about getting into the flow. No one’s like I have like my nose controlling like he had said, It’s me that the monsoon were becoming one thing, right? That’s like Nirvana. I don’t have to talk to people. Like there’s Nothing inconvenience with my compiler. Okay?

Chase Roberts 25:03
You said you don’t like to talk to people?

Brooks Patterson 25:04
No, why don’t I have my combivent? Like, I have something that like, I know how to work with and produce outcome, right? And now suddenly, I have like to do like something very different, like something that’s like much more fun. Yeah, I agree. Let’s do like customer discovery, but like doing customer discovery, it’s not exactly say a science. It’s a little bit of art. Also, like, you need to build intuition you need like to hear what the person says, and listen behind the words what’s happening there. Right, as you said, like, you have, you’re just like, the most interesting thing for someone like JP Morgan, instead of dedicating, like during a call, but you’re not going to get that like at the beginning, because you’re not putting doesn’t the bad thing, right? Like, it’s not saying that, like engineers have like some kind of like handicap, because it’s just like a different nature of like, how we produce like, vitamin work, right? And it takes them to change that. So it’s uncomfortable, dude. Like, it sucks. Like, it’s not nice. And it’s even worse when you get like them to call and you stuff like hearing like, no, hi, don’t like that. Or it doesn’t matter. Or I like it. And like after like 10 calls, you’re like, Okay, are you going to pay now? Pay? No, like, why I would do that. So what’s your advice like to people on like, love, they get into that they start, they feel the discomfort? Right? How they can heal themselves? Like, yeah, that’s a wonderful question. And I empathize with that tension,

Chase Roberts 26:46
because if it’s not something you enjoy doing, it’s kind of like, well, why, why should I sign up to do this thing? I’d say that, like, there are multiple routes to get to the information that you need to really understand the commercial design of your business. And, you know, one way to do that, and still, like, have you build primary information, talking to people, but I think that there is still a lot of good content, you know, for specific markets, and ways to come by that information, you know, with your headphones on in front of a computer. And so like me, too, like, you’re building a data infrastructure product, like, you know, there’s lots of stuff that you like, maybe I’m building the next I don’t know, like the next DBT, called MBT or something, whatever that means. And, you know, there’s things that can read about, like, how people interact with DBT, and how, you know, how analysts typically evaluate new tools. And I can think about my own experience, you know, if I’ve been an analyst myself, or what was my instinct here, and I can consume information that gets to that. But I would say that, like, you know, I would say that, you know, with anything, you know, the best route information is primary information. And if you can do it in a setting that allows you to, like, ask questions and dig deeper, and perhaps, you can get there faster. But I would say that, like, you have to do what works for you. Like, at the end of the day, like, our work is not, you know, we don’t need to be, you know, mercenaries, you know, we should enjoy the things that we’re doing. And so you had to forget that the mode that works.

Brooks Patterson 28:21
Yep. 100%. All right. One last question from me. Go to market usually has like two like major component ons, like sales and ones like marketing, right? What’s the difference in which one should someone like engage with? First?

Chase Roberts 28:36
Let’s Good question. Which one should I so we’ll define them first. And then I’ll talk about sequencing. So I kind of think of marketing as a catch all for a lot of different things. I think that in early stage, the feature of marketing that is the most important is product marketing, I think of Product Marketing, as the translation layer between what problem my product solves, and how my product does it. And so I think that there’s a great inclination, there’s often an inclination among founders, especially those that are technical, especially when they realized that they build something that’s unique and elegant, to want to talk about the how, right? Hey, we do it this way we feel these grades, you know, something under the hood, it’s really fast for probably using generative AI and some cool way. And it’s, it’s really interesting. But the thing is, like, like you, you can only get attention for so long. And people don’t typically respond to how they respond and what problems to solve. And so why do I care? Hey, this makes it easy to get your data from point A to point B. I didn’t say how I didn’t say, I didn’t explain the technology. But if you care about getting your product from point A to point B, then like, we’re gonna we’re gonna deliver some value here. And so I think that product marketing is basically figuring out the way to talk about the what, right the problem that we saw. All right. And so, you know, tactically, this means understanding the language that your customers use, or your prospective customers use to talk about this problem, and how they think about it. And then understand, and understanding the language that would actually compel them to act on it, and impel them to say, like, you know, I’ve got these other set of priorities. But this is, this seems important. And this is something I want to look more at. And what I would do one challenge I’d put to, you know, founders or technologists, or any product builder, is to try to like kind of keep the what are the how out of the picture, right, the handle is on my docks, my documentation page, and docs are the best place to understand how, and any person who wants to go dig beyond the what they can go find your docks, they can read now. But if your messaging is a series of how you’re probably not going to get, you’re not going to drive urgency. But if I can talk about what it makes it easier for buyers to self select, like, Hey, I get this a problem. I, yeah, it’s a problem. I care. But I got to talk a list like, hey, like, let’s just, let’s go read these talks. Like, yeah, there’s something here. And so I think that’s the most important thing at an early stage. And like early stage marketing, especially, because where I see the sequencing getting messed up is when founders will say like, well, I’ve built the product, I’m ready to sell it, I’m just gonna go turn on, like search engine, you know, by search engine, ads, Turon, do my growth, marketing and just start sending out emails, but like, that’s gonna lean on deaf ears, if you haven’t optimized product marketing, basically, the way that we talk about a problem product. So you know, so I was like getting that, right, it’s important. And then to your question on like, you know, what comes first, you know, marketing or selling.

Brooks Patterson 31:40
I think that

Chase Roberts 31:41
to do repeatable selling, you have to have the messaging nailed, because this is about handing someone a playbook. This is how we talk about our product, this is how we position it, and getting them to go execute that playbook. But I do think that revealing that playbook does take some early reps with customers, trying and failing with certain messages, trying with failing with certain ways. And we sell to those businesses like we run a POC, do we not do talk about pricing upfront, do we not? How do we talk about pricing. And then so I would say that like, real repeatable selling follows getting the product marketing, getting the messaging, right. But to reveal that you have to do some selling, you got to get some reps out in the field,

Brooks Patterson 32:26
how to present and it’s a very interesting conversation that we’re having. And like, we don’t usually have these, because we like to talk like more like, technical people or like the technical problems. But like, I realized, like, that’s like, why I stopped because like, I’m thinking like, as you’re talking like, it’s very, like, parts of the portfolio for me, too. So what I wanted to ask, actually, is, you said about, like, product marketing, and like, how the difference between the how, and what problem we’re solving, right? And I wouldn’t like to ask you, is this like true? Even when we market developers give our audiences like developers? Do we again, like need to go out there and like, talk about the what we are solving or focus more on how and the reason why I’m saying that is because it’s very common to hear from developers about the fluff, right? I’m going to a landing page. And it’s actually true, like, we get to abstract maybe times, like when the copy that we use, like on the landing page for the our product, right? And they’re like, Okay, I’m done with the flight, I don’t care about the flower, tell me like the durability of like, how this thing war, why like, you have like features of like, the other system does not have or whatever, or at the end, it doesn’t matter, like developers are still consumers, right. And they have similar behaviors to like anyone else.

Chase Roberts 33:58
It depends on the market, the markets maturity around their understanding of the problem. And so for example, ETL ETL are in ETL is a category that’s very well understood among its buyers. Right. And so or data warehousing, for example, like data warehousing is a category that’s very well understood among its buyers. And in those cases, like you don’t have to do you don’t have to talk much about the what, maybe in the case, you know, when Fivetran was coming out, is like, hey, you know, ETL with a lot less headaches, like okay, you know, but in those examples, your audience is already has a good bearing on the problem that it solved the thing that they would how your product to do, and then you do want to be, then you do want to push more of the house forward. But I would say that, like the balance is trying to figure out like, which how matters for driving that first interaction, and what in which house is just going to create too much noise. And there’s also like, there’s also So another balance here where you kind of want to leave some to be desired, right? Like you want to put everything out there. Yeah, because you want to give them a reason to engage. Because once they’re engaging, that’s whenever, you know, that’s whenever you have an opportunity to kind of build on that, and potentially drive that to a sale. If it’s a self service product, like, it’s still the same thing. It’s like, what information is actually necessary. It doesn’t have to be like, all the implementation details doesn’t have to be all of the, you know, that what makes us technically better than everything else out there. But the thing that matters is like, what is necessary for them to be able to evaluate this tool, make a decision? And so and so like, you’re the select, thinking, if I was gonna distill this, it is, what is the state of maturity around our understanding of the problem that it solves? Yeah. And then what is necessary to get to a decision? Yeah, actually,

Brooks Patterson 35:51
you mentioned Fivetran. Always there have like a lot to say that because I experienced like that period of time where, like, okay, building like a products you are addressing, let’s say, technically was a well defined category. But the categories like actually, like changing or like breaking into like subcategories, in a way, right, like, because if you think about, like, what happened with, like systems like Fivetran, is that we took like the concept of ETL. And we separated like into two parts. We named it like ELT, but actually, like, these systems are more of like an injection system, right? Like, the main work that you have to do is like to extract data and load data, and then we’ll see what happens, right? Like, we don’t care about that. And I think it’s very interesting to see that like, with Fivetran, who is, let’s say, the winner in this category, because at some point, they started implementing functionality close like to DBT to allow the transformation part, but they abandon that. And instead of that, they’re like, Okay, we have DBT now, like, we can work like we you should be using DBT you know, like, the sequel functionality, but we offer like, as part of the product experience. And, you know, like, what, what was like, very interesting popular was that you would build like these experience, which is like, so seamless, like it just like click a few buttons, let’s say and you start like seeing your data and getting into your data warehouse. But still, like, it took a lot of time for the market to believe in, like, the need necessarily, but also like, this is like a sustainable product of the end. But it makes sense for me like to be because we’re talking about infrastructure here, like okay, yeah, sure. It’s not like removing a data warehousing putting in different than our house there. But still, it is infrastructure, like it takes effort, like for a company like to put it in and like, take it out. And people you know, like what most people were saying, which is kind of like crazy, in retrospect. Why you’re building these, this is a feature for Looker, like Looker, we’ll build it at some point. And by the way, like back then was the time where Okay, the BI market was like really cold, right? And before like all the consolidation on what’s happening. So it’s very interesting to like, even like existing categories, how like new categories are emerging. And okay, going through like a new category creatures brought up and it doesn’t matter, like where you are like to do that. If you are like a YC company or another YC company, you are going to spend a couple of years where everyone was going to say you are crazy, like spending time on the ship, right?

Chase Roberts 38:38
The listeners can’t see this, but I’m nodding my head.

Brooks Patterson 38:43
So I don’t know it’s do you think of like a founder? Even if like let’s say they introduce for someone you’re like a first time founder, you don’t think in terms of like categories? Okay. You shouldn’t actually. But do you think that they should try and attach the product will existing category even if it is going to form like a new category or like go from the beginning into like nowhere like something unbelievable, like different? Like one day, Gardner was going to outlast that category. And we’ll be proud. We did.

Chase Roberts 39:25
This is the question that faces just about every innovator, I think that you’re the nice thing about the nice thing about there’s pros and cons for both, right? And so the nice thing about stapling yourself to an existing category is your customers already have an anchor from which they can start to evaluate you as a product. And so we’ll come back to like the Fivetran days, it’s like, we are an ETL tool, easier to use. Alright, let’s kind of distill that down, right. And so it’s like, that’s kind of the anchor. I’ll speak to illustrate the segment’s journey journey here and As a way to like make like elucidate some of the tension here. So, a segment, define, or attempt to define a category called customer data infrastructure, right? You know what one way to simply collect the events that your customers are generating across all your properties, and then send it to all the tools where that’s used, right infrastructure product is moving data around, there was an existing category called CDP’s, customer data platforms. And yeah, there’s one change of, you know, one change of words at the end. But these are like, fundamentally different things in the CDP at that time, and really been defined, as we’ll call it, and like, the live rams has shaped the universe, which is like, one place to store, like all the data that you bought about users on the internet, and that you can use for marketing, et cetera. And segment was kind of, you know, at the time, we were very explicit, like, look, we are for first party data. And we are about moving data around, we are not like this data intelligence layer, that we’re just really high performance and type pipelines. And so we’re like, we’re gonna define ourselves as customer data, infrastructure, customer data infrastructure. But then when you go out to the market, and you’re like, Hey, we are this we are CDI, customer data infrastructure. We don’t think that even heard of that, right? Because everyone’s been building it. They’ve been building this stuff internally themselves. Yeah. And they didn’t realize is a problem they have. And it made it really hard to, like, get some of those early conversations going. But we were very adamant for a long time saying like, look, we don’t want to be associated with this kind of this category that has a lot of baggage. But slowly, the category definition started to change. And then all of a sudden, it was like, Okay, well, it’s the category move, the CDP moves a little bit closer to us. And customers are now raising their hands thinking, we kind of need this version of a CVP, that’s a little bit looks a little bit more like segment. And so then I was like, Okay, well, we’re gonna re anchor ourselves to CDP. And we’re going to sell in that category and build on that demand. And then we’ll use the sales cycle, to change the way that they’re thinking about the definition of this problem. And so the challenge of that is your customers come with, like a list of things that they’re going to evaluate this product against. And you’re saying, Look, let me change the way you think about this problem. Let me see if I can change that list. That’s a hard thing to do. But so is building a category defining it from scratch. Yeah. You know, in the case of actually doing category creation, yeah, I think there are ways to do it. It’s not easy. You have some tactics that I’ve seen work. And then ones that I’ve seen work effectively are defining, like a very, like straightforward vocabulary, or that was for that category. And then lots and lots of repetition. Someone who I think has done this, well, in the data space is potentially resonate with this audience would be bar Moses at Monte Carlo data, your data observability, and data quality, if you’ve never heard those two terms together, you can kind of like, you know, you can kind of instinctively think like, Okay, I think what’s going on here note observability tool is you put data in front of it. So I think I know what’s happening. And it wasn’t something that people were talking about, at least the way that they are, have been for the last few years, you know, six, seven years ago, right? Like, it wasn’t a thing at all. But I think one of the things that Barr did well is hired a content marketer very early in the company’s journey. And then on a weekly cadence, or more than that there was new content about data, observability, data downtime, data quality, and they just drove that language over and over again. And then eventually, the category starts to emerge. And so I think that like, I think there are tactics to do that, I think, I think, what Guillermo did with for Sal and creating a category around a CDN for React, or for React components, which talk to any engineer, you know, seven years ago, they’re like, you’re gonna use bad words, but you’re, you’re crazy. And then all of a sudden, he’s not, the thing that he did was he brought the market forward by speaking out in front and center, and talking about this future version of the world, and getting people excited about what the world could like, if you are designing your applications in this way. Yeah. And he did it with repetition. And so I think that like, category creation, really depends on having or like one of the core features of category creation and do it well, is a lot of repetition and a willingness to be out in front and center and kind of become like the spiritual thought leader for that movement. Because it is a movement when you’re creating a category. If you’re not able to do that, then I would think about like, what can we anchor to, you know, without too much risk of being associated with kind of getting into the wrong, you know, evaluations. But it’s a trade off. It’s a trade off the whole way.

Brooks Patterson 44:51
Yeah, yeah. How it was fun, I think at the end, like because it has to do with the founders, right like you need and there’s no Good right here, it’s not like you have to be like a category creator or you don’t have to be a category creator. But I think it has a lot to do with also the person that they get, like involved, like their personalities, how they like their communication style, like all these things are super, super important, in my opinion, like and the founding team that you have at the beginning, it might have been like later on, like, maybe like, but I think that’s like, very, like rare, like, you need to have these Soda leadership at the beginning. And there are channels like that, like we can see, like was like, Medallia, for example, right? Like you have, like, you don’t even have like to use the product to know about the product, because you have someone who is in the forefront of that like talking about not just the company in the product and the technology, but also like everything around that, right. And you have to be that person, like you have to be able to do that. And once everyone can do that, and that’s fine. Like, I think the most important. characteristic is like love, you should have like, as a first time founders, like, just like to be honest with yourself. Like, it’s okay. Like, it’s okay, if you don’t feel like comfortable, like going into eating category, right? Like there’s still like ways to go and succeed. There’s no one way or another like something is like more glorious than the other. Right. Cool. One last question for me. I know keeping them in. Yeah. Pricing. That’s a thing. Yeah, that’s like another I think, very interesting. Topic, especially like, for first time founders. How do we price and most importantly, how do we iterate on price? I think like the biggest fear people have is that the moment that you put your price other, then you know, it’s like, we can’t take it back. Like we cannot change it. It’s like something difficult. It’s something I don’t know. Some people might feel like they are cheating, right? If let’s say they put like not $10. And tomorrow, I made it like $20, or like $5, right? I have my opinion on that. I’ll keep it for the end. But I’d share it. I’m very opinionated on it. You always fight at the end, there’s no way like to not fight about pricing in like when you start the company with like your founders or like whoever else is like your board, like you will have discussions about that stuff. You cannot have what you need. But I think there are ways to enjoy it, doing it. But I want to hear from you. So what’s your take, like on pricing?

Chase Roberts 47:44
So I’ll react to the second thing you said? And then we’ll and they’ll answer your question around pricing the route and like the statement you made around, like, once it’s out there, you can hit the undo button and like how do you iterate? I actually think it’s entirely false. I think founders have been over inflated or even, like even larger companies have an over inflated view of how aware the market is of what they’re doing and how they’re doing it. And I do think that you have the flexibility to change pricing. Now could it like a company at AWS scale, to turn around and say, We’re gonna change our pricing model? And then the metrics for how we’re doing it? No, I think the world would probably unfold at that point. Yeah. But I think there is a point that’s probably higher than what most founders believe about, we’ll call it like, if you’re still a private company, chances are, you can probably still aerate pricing with very few, like, very small implications, and no one cares. So I didn’t want to say that there. And then I will say this, you know, on that point, founders also need to be willing to iterate, be comfortable iterating into perpetuity, meaning, hey, I might have had the right pricing model today. That actually could be the wrong one and three years in. So I think there needs to be willingness to look at it and be willing to, like, adjust that. So let’s come back to your question around like, Well, how do you price? I would say there’s probably like, three things that I would consider this one is like, what is the unit of value or the value metric for like, that my product creates? And so like, and so if, for example, if I’m I don’t know, if I’m an infrastructure product, and, you know, the unit of value here is like, well, I could build this thing internally, or I could buy this from you. And, you know, install it in a month. And then it’s, you know, great, I’ll never have to deal with it. Again. The unit value is not number of users, right when I do user licensing there. And so I would, so I think value is one I think that also, you know, I’m going to come back to same when I made the very beginning of this podcast, which is like how your customers want to buy, if your customers if the way that they buy all of the other tools in this category. And all in the way that they think about buying infrastructure is on a number of nodes or API calls to come in and offer something that’s completely different than that. Unless your customer feel like, has a lot of angst with the way it’s currently priced, and they’re just like, hey, this is the in the world, if I leave it at another bill for API calls, I’m gonna die. Don’t try to get too creative, because otherwise, you’ll induce confusion that could be unnecessary for your customers. And there’s just some level of comfort that you just want to operate around. And then I would say like, the third thing is, make sure that whatever your pricing is, it’s not going to disincentivize growth and disincentivize consumption. Yeah. So secondly, I mean, we went through like this, just like a difficult part of the journey for the company, which is like, how do we capture the value that we’re creating for our customers? And, you know, the, you know, one iteration, we thought about API calls, but these are really hard to predict for customers. And if I can’t predict what I’m going to be spending with you, I don’t feel comfortable buying your product, because it could just surprise me. And and you also get the situation where you’re disincentivizing some bit of consumption, and we don’t want that, you know, we don’t want that as a company. And so then we thought to ourselves like, well, you know, we ended up settling on this thing called Monthly Track to users. And best way to think about it is if I’m using segment and I have 100 users that what my pricing is dependent on the number of users that I have, right, in a given month. And yeah, that’s that, yeah, that worked pretty well for us. But, you know, come back to the thing I said earlier, which the value we create is like, basically moving data around, we’re solving a data infrastructure problem, simplifying that. And that doesn’t necessarily always correlate with the number of users. And so we might have had companies that are might have using might have been using segment to move data from one source to two destinations, but could have had, you know, millions and millions of users like a consumer product. And under our pricing logic, they’d be spending way more money than they had the capacity to spend that then we could have big fortune 500 companies using segment that are b2b companies and have very few end users call it 1000 end users, but they give you moving data from you know, 100 different, you know, 100 different sources to 100 different different destinations. So the value that they’re capturing is outsize relative to the number of users. And so like, I don’t know, where the company or like how they’re doing it today, I’ve been there for a while, but like, it was a tough problem. And so I give that example. And I’m hopefully not revealing too much. But like, I give that example just to demonstrate that, like, it’s not that there’s not obvious answers here. And but you have to be willing to like iterate and ask the hard questions. Make sure that you’re capturing the value that you’re creating for your customers. Yeah.

Brooks Patterson 52:35
No, I totally agree with you. I, okay. I’ll give my opinion like on pricing. First of all, pricing, like as everything else that you do, like when building like your company, you have to iterate and we have to you have to be bold with like making changes to be honest. And well, I think like people get wrong from the beginning, is that the first time is that pricing somehow it’s something that, you know, it’s like, too important for the market out there. But like, the reality is that like when you’re like just starting the cares about you. And the moment like if you had that, like it’s a very liberating, like realisation like nobody cares. Like not even like the people that are using you already. They probably don’t care. Like, like, you’re just like most people they buy especially like when we are talking about infrastructure products, right? You want like to take it like raw meat and you don’t want to care about it. That’s why like we are outsourcing them. Right? Like not because you would like to be on top and like b&h underneath, like if I bought this ladder, and you will be watching Netflix move, like playing with it. So that’s a hard thing. The other thing is that like when it comes to pricing, I think one’s like super important is that the pricing has to be simple for the customer to understand, right? Like anything that’s like too complicated. It’s an indication that like, there’s something that we don’t get for your customer, right, like and there are like playbooks they’re like I like what you said at the beginning about like, how you you’re bright and like the model that you have, like my like rule of thumb for example, but is this a productivity product? If it is a productivity product? Yeah, you should go with like have a sip based like pricing because it’s very easy for the people out there to calculate like, how much they’re going to invest in you and how much they expect to get back right? Like every new salesforce account is a new salesperson, right? Like they can almost like quantify exactly like each dollar that they pay on Salesforce what we’ll bring back right, and it works for that. Can you do that like for data infrastructure for rds? Can you imagine RDS with like SIP based like pricing? I mean, Splunk does nothing but this bargains. Unique about okay,

Chase Roberts 55:01
no comment. Yeah.

Brooks Patterson 55:03
But like, you can’t like you need to have like some kind of like users based like pricing, right. And that’s what like things I think, start like, getting complicated because what people don’t understand is that calculating like, and figuring out how to charge might be complex. But you have to hide this from the customer. And the best example that I can give about that. And that’s because I probably was my electrical engineering background is like, your utility bill, like for electricity, right? Like the, the process of calculating the price of electricity is extremely complex. There’s a lot of forecasting happening there. Like it’s super, super complex, right? But yeah, as a consumer, you don’t have to know anything about that. You know, that, like you’re paying like this amount of dollars. And if you connect this thing with a hitter, you can see the value out of this, right? Like, okay, software is, let’s say, more complicated, but that’s where like, we should aim to, like, that’s what our Northstar as like, people like build companies on top of technology should be right. My only, let’s say, like, what I don’t like that much like when people like combines try to gamify the pricing. And I think we see that a little bit like with, like, the credit systems and like all that stuff, which, yeah, like they have their own purpose. But there is also like a little bit of gamification that’s happening there. So, anyway, it’s a huge topic. But I can keep talking for like, forever, obviously. I’m one

Chase Roberts 56:46
thing to the user licensing. So I think one important feature of a user licensing model is making sure that when user one logs in that person’s experience is unique to them, relative to user two, otherwise, you will have people sharing, sharing licenses. Yeah. And if our product like Slack, like I log in is way different than whenever you log in. And it’s going to be it’s going to be unique, but like, there are tools that

Brooks Patterson 57:16
not to reveal anything, but there

Chase Roberts 57:18
may be tools that the VC firms pay for that give you access to research or data or things like that. I log into this exact same issue, I’m not going to pay for two licenses. Yeah, I think that get figuring out how to, like, create unique user experiences is a way to like command pricing there. And then, and then I’ll say this, like, you know, trying to figure out like, what the ceiling are, how much you can trade really comes down to understanding what measurable value you’re creating for your customers. Yeah. And so you know, I kind of bucket things in bucket products into two buckets. One is there’s, I can’t measure value, but you kind of know when you see it. And then there’s the value that I can measure. And you as an investor, tend to just stick in bucket two, because bucket one is typically a religious movement, I can’t predict those. So for example, bucket one products or slack at the seed stage, you know, whoever invented the seed, actually, no, it was a great, but like, is there any way to know that this form of messaging was going to transform the way that companies communicate? No. Right? And but if you were to go to any CIO, who has a, you know, $10 million slack contract today that does exist, and you say, what is the value of this the organization, they’d be like, my users are going to be furious. If I take it away. Yeah, and we have to have it, I don’t know the value can measure it, but it is we need it. Those are really hard to predict, in the second bucket. And those are also hard to price for that reason to develop pricing power, the more you know, religious converts, you get over time, and then these YaSM with which they need that product, the former budget, which is the way that I can measure and value gets measured on three dimensions typically, does it influence revenue in some way? Does it improve profitability in some way, meaning, reduce costs or avoid some costs? Or does it remove some risk, because risk is measurable to a lot of organizations. And the nice thing about understanding the value that you’re creating is you can measure it, ah, if you build this yourself, well, it’s going to take for engineers, those costs, you know, $150,000 a year, it’s going to take you eight months, we can do that math to figure out, however, how many hundreds of 1000s of dollars or millions of dollars, it’s gonna cost you or you can buy from us and we’re charging, you know, 25% that as a value trade that I can make all day and I can communicate that to my customers and, and the job of the founder or the job of the person like building a product or selling is to figure out like, like how explicitly Can they communicate that value? And how close can they get to the top of that value trade? Well, if I can communicate a million explicitly, can I ask for 900k here, right well I’d like, How can I exceed that ceiling? Is there some other value that I’m creating that like a premium This customer is willing to apply. But trying to figure out where you are in terms of that measurable value is really the job to be done. And that’s how you think about pricing.

Brooks Patterson 1:00:11
Yeah, man. Well, Jason has been a fascinating and super helpful conversation. I have kind of one observation is I’ve been sitting here listening and what I’ve asked for connect with you. But it’d be kind of towards the beginning of the show, you talk about like, how can engineers aren’t good at marketing, and talking about expanding the scope of the problem from just building the thing to like, also getting it into the hands of the right people. And he talks about, like, applying the engineering brain to that whole problem, not just the product. And one thing I’ve been thinking about is, we’ve been talking and the pricing conversation, we talked a lot about iterating. Right. And I think that’s like, that’s a piece of engineering that should directly be applied to go to market is like, shipped and iterate and ship and iterate and you’ll get better and better as you go. But I think that’s a little piece that engineers can hold on to this, like, very familiar, and has just been that’s been going through my head, as we’ve been talking, beautifully summarized. But that said, folks who want to connect with you, how can they do that?

Chase Roberts 1:01:20
I have a very easy email. Unfortunately, it’s composed of words that are easy to spell. It’s Chase at vertex ventures.com. And then I’m also on Twitter. And it’s just Chase Roberts with no vowels to get to keep it nice and succinct. Would love to hang out in both forms.

Brooks Patterson 1:01:40
Great. Well, Chase, thanks so much for spending some time with us today.

Eric Dodds 1:01:45
We hope you enjoyed this episode of The Data Stack Show. Be sure to subscribe on your favorite podcast app to get notified about new episodes every week. We’d also love your feedback. You can email me, Eric Dodds, at eric@datastackshow.com. That’s E-R-I-C at datastackshow.com. The show is brought to you by RudderStack, the CDP for developers. Learn how to build a CDP on your data warehouse at RudderStack.com.