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- [00:00]
Audience Member
Foreign.
- [00:10]
Narrator/Host
How do you stand out in a completely commoditized market? At Founders Summit held in December 2024, we brought in Nathan Lakka, the guy who's deployed $180 million across 519 deals to SaaS founders just like you. Over 11,024 SaaS companies using his software. And, and he has a ton of data about what you need to get to eight figures and beyond. Nathan shared the three moats that are driving companies to $10 million plus revenue. These aren't theories. These are real playbooks with real revenue graphs from real companies ready to stop playing the same game as everyone else. Here's Nathan's complete presentation from Founder Summit.
- [00:48]
Wes Bush
So we have Nathan Latka who's joining us. And anybody knows Nathan. When you think about, like, winning and all that stuff, he's got the fun personality where it's like, oh, yeah, just going to win. Got that vibe from him on that end. And he's got a really great experience on just documenting and understanding, like, what companies at the highest level are doing some really fascinating things. He's going to lead a quick presentation and just going through what are some moats you can consider for your specific business to help you win. And he's got three companies where he's going to share exactly what that looks like today. But Nathan, welcome.
- [01:24]
Nathan Latka
Wes, thank. You know, you're so. Thanks. Thanks for having me. First off, you're so humble. I can barely get you to say the word win without you being like, oh, Nathan, this loves winning. But yeah, I'm competitive, I love winning, I love big numbers, I love your numbers, I love everybody's numbers and I love winning and I love dissecting with numbers. So it's a pleasure to be here and thanks for having me.
- [01:42]
Wes Bush
Yeah, no, it's awesome. So for this part, this is probably my favorite part of the whole kind of presentation we're going to be doing today because, like, how you win is.
- [01:50]
Narrator/Host
It's.
- [01:50]
Wes Bush
This goes all back to the theory part when I said like, you know, a strategy. It's not a plan, it's theory and how you're going to win. So each of these modes should be something like, oh, yeah, if we did that and we did that really well, our odds of success were like, way higher on that end. So, Nathan, take it away on like, what are some of those, like, top three modes that you have identified? And then I'm going to go through the other ones to get everybody thinking about, like, how do we actually win in our market?
- [02:14]
Nathan Latka
Yeah, well, I think you did a great job ahead of this, sort of preparing for this to make sure everyone that was live today got the best use of time possible. So I che, I took the 14 you put together and said, hey, I've got some good examples for each of those. And so I sort of reverse filled backwards. And so, guys, the way I picked the three to focus on is I just picked which ones I think are the ones that are going to work the best well into the future. Like starting where we are today, right? We're in a world of AI. We're in a world where everyone is sending cold emails, everyone's trying to personalize at scale. And the question is, if everyone has these tools, who wins, Right? And that's the question. And so these three frameworks you're about to see are how you want to go about hitting 10 million bucks in revenue based off the interviews I've done, my podcast and sort of who's done it or my first person experience. So these are the three modes we're going to cover. We're going to spend three minutes on each. This is going to be rapid fire. The first mode is founder brand, how to turn yourself into celebrity and how that can lead to ARR. Second is pricing mode with UDU and don't leave money on the table. And lastly is about affiliates and powerbuy and how to turn your freemium users into a powerful marketing army. A lot of people ignore their freemium users. They forget how to actually turn them almost into, like, your marketing employees. So we'll jump into that. The first one is pretty selfish. I love teaching this one because I actually, I did it right, like, or I'm doing it. And so I love teaching about things I'm like, actively doing. The reason I care so much about founder brand is not because, like, you know, it makes you feel like a celebrity or things like that. I'm constantly thinking about what can't be replaced, because that's how you're ultimately going to be valued, whether it's in this company. I'm talking valuation exit, right? Like whether it's this company, next company, or future company. And when you look at some of the most powerful companies today, a lot of them put media brands around their software company or the CEO has sort of reached sort of celebrity status and it's driven incredible economics for the business. And so how does that apply to software as a service? The mental model I came up with for this concept is this on my screen. And I'm going to explain this here in a second. So Let me give you some examples. How did I use founder, brand, right, to build monuments that generated this revenue graph for Git Latka. So this is the real revenue from Gitladka.com, right? So how did this happen? This is before I launched Founder Path. Well, the question you want to ask yourself is, if you had a book, right, that sold 30,000 copies and became a Wall Street Journal bestseller, how would you use that to build your software brand? And this isn't, you know, like a small book on, you know, Amazon with three reviews. I mean, this is like number three, Wash your bestseller. You're printed off on millions of papers in the US you're ahead of Dave Ramsey and James Clear and Jim Collins. Like, what would that mean for your software company, right, as an asset moving forward? What about this screenshot? My podcasting back end. I know some of us are guilty, right? We get excited about podcasts. We launched one episode a year ago and then we said, oh my God, this is terrible. I can't do this once per day or once per week. And then it stops. You guys are smiling, right? Those of you that have tried, kudos for trying. But it's tough because you have to keep like this pattern, this behavior. But what would it mean for your software company if you had an episode, right, and you could get 6,000 listens in the first 30 days of all your target ICP that you just wrote down and identified with Wes in the earlier sessions. What would that mean for your brand? What if every time you sent an email, this is a screenshot of my email marketing backend. What if every time you sent an email, you could generate 16,000 opens from your core ICP and more than a thousand clicks, right? Qualified clicks. What if you could do this over and over, programmatically? These are the things where if you align this sort of social proof, you can really drive growth of your SaaS company. And ultimately you can use it to skip through different forms of media. Like, what would it mean if something massive happened in your space and you can immediately text the producers of CNN and Fox and get on Cable. No PR firm that you're paying 20 grand a month, direct text relationship with the producers. What if you could do that? That's how you win, right? That is how you win and define a space, right? Whether it's inbound, marketing agent, AI, etc. If you only take one screenshot from the next, you know, six, seven minutes we spend together, it's this one. This is what I use with my team. It's what I think about every night, every morning. What we are doing now to build founder about is we are building social proof monuments and there's five examples there across the top row. Now I want you guys to take, I hope you guys are testing one of these, whether it's mini user sessions, dinners in person, YouTube videos, podcasts, maybe you're writing an ebook. Guys, just to see if I'm. If this is sort of resonating in the chat type of monument you're working on building right now that you feel like is going to help you grow your SaaS company, just pick one. So you guys already thinking about this? Let's take it a step further. You don't just want to do this for the dopamine hit of 100,000 views on your YouTube video or beating James Collins or James Clear, right, or Jim Collins in the Washington bestseller list. That's what like influencers do who are broke, your software companies. What you want to do is use that social proof to build your software company. So what are the assets that you should build to grow your software company using these social proof monuments? Most of you are only building the asset in the bottom left. I would strongly encourage you to start building the asset in the center bottom and the bottom right. Because as that channel on the bottom left in my screen right now gets overpopulated, the only way to break through the noise will be text message marketing or physically shipping things to your icp. The center and bottom right assets I'm targeting here. Oh, go ahead, Wes. Yeah, go ahead.
- [07:43]
Wes Bush
The screen is still on. Monument builds assets, which build value. Is that the bottom left you were talking about?
- [07:49]
Nathan Latka
Exactly. So guys, look down here. See where it says assets? Email lists, text message list, direct mail list, those are assets. When you go to sell your company, when Dirk gives you a 20x multiple on your SaaS company and buys you a SaaS group, I hear they're paying crazy multiple like 20, 30x. You should all email Dirk. But if Dirk buys your company right, one of the things they're going to look at when they're valuing it is, well, they'll look at list, they'll look at your distribution, your marketing channels. Do you own and operate your own distribution channels that will actually increase your valuation right at exit, Right? So, so yeah, west, is that all ringing true? You can keep me honest here. Does that sort of system make sense?
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Wes Bush
Definitely makes sense.
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Nathan Latka
Okay, cool. Cool. There's a lot of folks that frankly you're just, you're really humble. You're nervous to put your face out in front the problem is customers are not going to buy from you if you, if they don't believe that you as the founder, have empathy for their problem. So founder market Fit is better than product market fit. If you communicate your backstory publicly, I'll do it for Founder Path. I'm Nathan. You should work with me at Founder Path because I'm not a VC or an ex banker. I actually built a software company. I sold too much of that business and when I exited, I made way less. That's why now I'm looking at new ways to fund software companies where the founder can keep their equity. That's why FounderPath has a debt fund. Today we've put out $200 million worth of capital to 400 companies. You should work with me because I understand what it's like to be a software founder. The bankers and other firms that we compete with have Never built a SaaS company. Work with Founder Path. That's like a very quick example, right? But you can't lie about your backstory. And if you're not publicly telling your backstory, the world is not going to know that you have empathy for their problem and you're not going to get customers. Wes, anything you want to add here before I go into moat 2 and 3?
- [09:30]
Wes Bush
Yes, Laura had a great question. So like I hear so much about like removing yourself from your company. This literally feels like tying yourself to the company. So especially maybe even from the. We'll talk to Dirk about this too. But like when you're selling your company, it's like, hey, listen, like Founder Path is, let's say it's so tied to Nathan on that end. So how do you like mitigate that? How do you think about that? Because I totally get it. Like it could be seen as like, that could actually hurt the business enterprise value potentially too long term, but it is extremely powerful.
- [10:02]
Nathan Latka
You should keep this top row of monuments for yourself personally because it allows you to be king or queen maker the rest of your life. You can direct all that traffic into whatever businesses you're launching at that time. The asset that Dirk is going to pay for at acquisition is not the top row, it's the bottom row. He will buy SaaS Group will own the email list, they will buy that text message list, they will buy that direct mail list. That's part of buying the assets of your software company. That is how you keep a very clear differentiator between your media moat that you're building personally and your founder story and then the software company you're building today. They can really nicely west work together.
- [10:40]
Wes Bush
Awesome. Thanks for answering that. Yes. Let's go on to the next note.
- [10:44]
Nathan Latka
Okay, cool. So, yeah, so that's, that's how, like, that's how growth works, right? The software examples. We've got book reviews, podcasts, etc. Pendo is doing this, right? They're buying conferences for a reason. This conference is a monument. When you see this picture of a packed Pendo conference, you go, whoa, I should try Pendo, right? I should try Pendo. So this is the summary, right? You want to build these monuments because in a world of deep fakes, you can't fake an Amazon bestseller printed in the Wall Street Journal. You can't fake cable appearances, right? It's high trust marketing monuments. Become these assets to build your funnel. And I believe founder brand is more important than product market fit. Let your men emote number two. How do you win on pricing? Now, everyone has a perspective on this. My personal perspective is I very rarely interview a CEO that is using this as a moat if they're less than like 5 million of revenue. This is a really good playbook once you're at like 10, 15, 20 million of revenue, which is undercutting your competitors on price. Right, and so how does UDU do that? Well, here's udu's revenue graph. A lot of people have never heard of this company, which is shocking to me because I believe they'll be bigger than Shopify the next five years. Right? This is Fabian. He launched udo back in 2006 as an agency. He got stuck in under 5 million revenue. 2016. Building open source, Right? About building open source. Let's dive a little bit deeper into his revenue graph here. That's what his first website looked like in 2009. Now you'll notice again, it's basically consulting company and an open source ERP he was building, right. In 2012. You can see his GitHub account right here, 5966 commits. He's actively contributing to that open source community. Right? So he's an engineer here, right? If we move forward to 2015, he finally launches paid SaaS plans on top of the open source community, which, by the way, guys, is a very tricky thing to do. You're seeing this blow up right now on Twitter with WP engine, right? Versus automatic, right? And WordPress, right? Open source commercialization, not contributing back to open source or not, et cetera. So this is a very tough thing to do on top of open source. But he launched in 2015 and that's when the Revenue started to take off, right? Starts taking off. Listen to what Fabian had to say in 2019 when he was at 30 million bucks of revenue. Now he's 10 times that size.
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Audience Member
We are $2.6 million per month and 65% per year.
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Nathan Latka
And so how many customers do you have today?
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Audience Member
11,000.
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Nathan Latka
Okay, 11,000. 11 million would be a lot.
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Audience Member
We actually have 4 millions of users because we do have a lot of free users because of the open source nature of Fudu.
- [13:11]
Nathan Latka
Right. So guys, what you just heard there, no marketing team early on, right? But 4 million folks using it already. And he used and then put up a very simple paywall to convert those free to paid. Now what's interesting is I want you guys to look at these two rows. Which one of these do you believe is Odoo's numbers? Odoos. This is comparing Odoo to Shopify. The top is Odoo, the top is Odoo. So Shopify is only beating Odoo in one metric, which is online websites. But that's a lagging indicator if you're going to predict who's the bigger company five years from now. You want to look at the leading indicators which are users today that convert to paying customers later or number of partners today driving traffic. Odoo's this top line, right? I think they will be much larger than Shopify very quickly. And here's how they're winning on pricing. This is how you went on a pricing mode, going after a multi billion dollar company like Shopify. Here's how Odoo's doing it. They literally have launched a free version of Shopify, right, with 80, 80, 90% of the features that Shopify has. Here's right off their pricing page. Now once they build that massive list, right, of users and activations, they'll start to convert those folks obviously to paid. Right to paid. Now he can only do this because of the arbitrage on his profit and loss statement here. Do you guys see anything interesting? Something that's really small under in these core expenses and here under gross margin, what looks really small, what line item feels very small relative to 320 million bucks of ARR in 20, 23. 20 million. Only $20 million spent on engineering on 320 million of arrow. That's less than 10% of their ARR on their, on their development teams. Do the math for you guys right now, what do you pay your engineers relative to your AR? I bet most of you guys are at 40, 50, 60. Some of you guys have your VC backed, you might be spending like a crazy person. You might be at 100% of your MRR. You're spending on your engineers. This is wild. So how did he do this? Well, because the first moat he built was the open source mode. He got engineers giving code for free. That allowed him to then build the, the pricing mode. And like Wes, when you stack these moats, that's how you win. It's why I think it'll be bigger than Shopify. What do you want to add there?
- [15:16]
Wes Bush
I think it just goes back to like each of these modes. I know like you're going through the pricing on right now, but what allows you to have that price advantage is the open source side of things too. So that's actually another mode that they do have as well. So it's very rare. It's like just one mode. So it's always thinking about like what are the complementary modes that allow you to make that possible. And so this is a fantastic example and it's super interesting seeing the numbers. I didn't actually know that before this, but they're crushing it. 12 million users, that's crazy.
- [15:47]
Nathan Latka
It's wild. It's really wild. Yeah. And west guys brought up a great point. You don't want to try to do all these moats at once. You want to find the one you can dominate and you have to dominate one before you layer. Kick on the second and third and then you become superhuman. Once you have four or five motes working right, you become indefensible. That's how you get a crazy high valuation, right? You have full control of the business. So here's the summary of moat number two. Don't launch with this tactic, right? You need cost arbitrage to make this work. Like low cost engineering from open source. Or maybe you don't have to hire any sales reps because you have an army of affiliates. We'll talk about that in a second. Right, and the question is, can you sustainably keep that price war going and upsell later? And Nathan, you are right, they did just. If I go look really quick, Odoo, they just raised, I believe it was 500 million on a 5.3 value. Is that what it was? It was 5.3 billion. Let me see what the number was here. Database, what was it? Yes, they sold 10% of the company just a couple weeks ago and they raised 550 million at 5.5 billion post money. So yeah, I mean he's crushing. And by the way, a chunk of a massive chunk of this was secondary he's taken 500 million bucks of secondary already out of the business. Right. So it's just. It's an incredible. Right, Wes? It's like one day, you and I. One day, everyone on this call will be there. Right? One day. Anyways, so that's the second. Let's jump into the third moat, which is the free mode. Now, a lot of you guys, you said you have freemium users. Let's look here at Mode 3, the free mode. Right? We're going to look at Omnisend. Here's our revenue growth. Now, I picked a Bootstrap founder for this one because I. I'm going to guess some of you guys are probably bootstrapped, which is great. We love bootstrappers. So here's Right, as you can see, his revenue growth here. And so how did he do this? Well, let's take a deep look at one of his most powerful channels. It's this page. I become an OmniSend affiliate and learn. Now, a lot of us dream about building an affiliate army, but what generally happens is you think, oh, I'd love to get that influencer to sell my product. But then you think about, well, how do I find their email? They're on YouTube. How do I convince them to put my product in there in their YouTube video or in their email list or in their blog post or in their book or in their podcast? Like, how do you do this? Right? And it's like how you can consistently do that to build. Build sales. Right. Well, let me just start off with, like, the tool set. Most SaaS founders use one of these eight tools to manage their affiliate program. And I think you're on. I saw you on here earlier. Right. Are you still here with Reddit?
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Audience Member
I am, I am.
- [18:00]
Nathan Latka
All right, so good. I have you in the right category here, right? You've got, like, expanding user guiding. They're using you to manage their affiliate programs, right?
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Audience Member
Yeah. And the big one we have now is Miro. And actually our site is Get Ready this. Com.
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Nathan Latka
Get Ready this.
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Audience Member
Com is too expensive for us. We're bootstrapped.
- [18:15]
Nathan Latka
I love that. I love that. Okay, cool. But, yeah, I want to point you out. You're a great example. But, guys, the other great thing about all these sites, many of them will list your competitors, affiliates, programs. So you should go screenshot this slide, maybe go to some of these sites and type in your competitors and see what your competitors are paying out. Right? Because ultimately, if you're going to win over affiliates, assuming you have feature parity, the way you're going to get influencers and affiliates to choose your product is if your economics are better, again, assuming feature parity, right? So starts off with this, right? You got to obviously have a tool that you like to use. How do you send the links to the freemium user so that they know then how to market, right. The product. Then you obviously have to find affiliates. These are three of my favorite ways to find affiliates. A lot of you guys, if you have competitors that use affiliates, their affiliates will record webinars. Well, what does everyone do with the webinar once it's done? They put it up on YouTube as a recording, right? So let's say I was competing with. I'm going to make this up. Let's say I had a productivity tool and I was competing with ClickUp. I could go in here and type ClickUp Webinar. So my competitor's name plus the word webinar. And hopefully I'm going to see a bunch of folks, right, that are not ClickUp, like Zen Pilot posting ClickUp Webinars. And when you click into most of these things, what you will likely. And again, you don't want to do ones that are from ClickUp, right? You want to do the ones that are like, not from ClickUp with a lot of views, right? So here's a great example. ClickUp Review18000 7 months ago let's go see if they've got an affiliate link. All right? Boom. Get ClickUp. What do you guys think this is? You think this is an affiliate link or not right here? I guarantee it's an affiliate link, right? So the question is, what is ClickUp paying this guy? And if you have a tool that is feature parody with ClickUp, how do you convince him to go switch out this link for your link or record a video for you? Right? That's what I mean. That's why I say the first tactic Here is use YouTube. Second is a really cool site called Paved. Paved is like Beehive, but everything's public. So like, if you go to pave.com, think of it like Google Adsense, but for email newsletters. If you go in here, you can type in the industry you sell to. And what it will do is it will show you newsletters. That's all that are built, like, with readers in that specific sector. So, like, let me see if I can like quickly get in here. Publisher, advertisers, marketplace. And Obviously we're all B2B, right? So let's all. Let's just pick tech. So I'm Saying pave, show me all the big tech newsletters and I'm going to go just pick it. Maybe you guys have a dev tool that helps with software testing. Well let's go look at this list size. Okay. 120,000 subscribers. And what's it cost? Usually you have to email, it takes forever, but we have it all right here. Costs 1500 bucks, right. So you're paying on average 10 to 13 CPC. Well compare that to your Google Ads CPC, right. Like which one's cheaper? Should you test the newsletter or not? So paved is a great way because what you could do is say hey, instead of paying you a CPC or sponsor cost, hey Mr. Newsletter writer of this newsletter, what if you would you do an affiliate deal? That's a really good way to find affiliates. So anyways I won't beat this down. The last is like go find people like Wes that have written a beautiful book on Amazon with a lot of reviews in your sector or category and try and convince him to become like the like Give him equity 5% of your software company if you're building a product LED or a product related right. Software tool. Assuming Wes isn't going to build one himself. Right. A lot of Wes is multi talented but a lot of authors just want to write, they don't want to work with engineers. So it's really easy to go work with them to then build software around the community they've already built. So that's a great way to find affiliates. And then what happens here is this is what Omnisend has done. If you go on YouTube you see all these influencers creating Omnisend videos, right. And then they all have affiliate links. So these are the steps. Set up your commission, pick your tool, recruit those affiliates. Some quick rules again, turn those free years into affiliates automatically put their affiliate link behind their Powered by badge. If you use Powered by. And then I wouldn't recommend going more than 30 or 40% of year one revenue with affiliates and make sure it's lower in years two and three. You need to get back your margin over time. Otherwise if someone like Dirk comes in to buy your business and you have a hundred thousand dollars of monthly revenue, but in cost of goods sold, Dirk sees that you're paying out 70,000amonth for your affiliate cut. Dirk is gonna go, eh, your valuation is actually 0.2x, sorry, right. Your margin is like 10% and most SaaS companies are 80%. You have to get back your margin over time. So those are the three big moats. Wes, we talked about founder brand mode, pricing mode, and free mode. Hopefully that was useful.
- [22:33]
Wes Bush
And to wrap things up, thank you everybody for listening to this version of the product podcast. Make sure to rate Review this on wherever you listen to podcasts, whether it's Apple, Google, you name it, Spotify. I'm going to read every single one of those views and that's how I know how to improve this. Also, if you want to stay in contact with Bean and learn what is going on in the world of PLG and and every single week, get the best actionable deep dives on product led growth. Make sure to head on over to product led.com forward/newsletter I am personally writing each of these deep dives every single week and you're going to get a ton of it. So make sure to head on over there to product led.com forward slash newsletter.