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The SaaS Podcast - AI, Growth & Product-Market Fit for SaaS Founders
451: Pendo: From Two Failed Startups to $200M ARR SaaS Success - with Todd Olson
00:48:25
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- [00:00]
Todd Olson
Foreign.
- [00:10]
Omar Khan
Welcome to another episode of the SaaS podcast. I'm your host Omar Khan and this is a show where I interview proven founders and industry experts who share their stories, strategies and insights to help you build, launch and grow your SaaS business. In this episode, I talk to Todd Olson, the founder and CEO of Pendo, a product experience platform that helps software companies understand user behavior and improve their applications. In the late 1990s, during the DOT com boom, Todd started his first company, which eventually led to a promising acquisition offer. But the board thought Todd and his co founder were too young to handle negotiations themselves, so they brought in someone else. The deal fell apart, the company pivoted to services and Todd ended up leaving. His next startup struggled from the start, Todd made what he now calls an idiotic mistake. He assumed CEOs had to be non technical, so he gave the role to a sales guy friend. They couldn't find Product Market Fit and Rally Software eventually acquired them, which Todd described as a good soft landing more than a success story. Todd stayed on at Rally as head of product and that's where he discovered the problem that would become Pendo. He had no visibility into how users were actually using their product and and he couldn't guide them when they got stuck. So in 2013, he left to build a solution he wished he'd had this time. Todd obsessed over Product market Fit from day one. He built auto tracking into Pendo so customers didn't need developers adding tracking code everywhere. But nobody was searching for product analytics plus in app guidance. The category just didn't exist. So with inbound marketing not being an option, Todd went manual. He leveraged his VC network for intros and started messaging heads of product on LinkedIn. And for the first year, he focused on the number of installs as the most important metric. By October 2014, Todd noticed one company using Pendo constantly. He called them and closed his first paying customer at $500 a month. Today, Pendo generates over 200 million in ARR with about 880 employees and has raised over $479 million to date. In this episode, you'll learn why Todd refused to hire salespeople until he'd validated the sales motion himself at 500k ARR. How raising prices 10x overnight transformed Pendo's trajectory without losing deals. What Todd learned from two failed startups that shaped his obsession with Product Market Fit we talk about why creating a new category meant abandoning inbound marketing for manual education and how for five years, Todd refused to build features competitors had and and why that became Pendo's biggest differentiator. So I hope you enjoy it. When was the last time you verified your app's emails actually reached users? Someone signs up, expects their welcome email nothing. They try password reset, silence. They assume your product's broken when really those emails are sitting in spam. Mailtrap is an email delivery platform built for product companies that send at scale, trusted by teams at Atlassian, Adobe and Calendly get faster delivery, high inboxing rates and industry best analytics. And right now, you'll get 20% off all plans with the code THESASSPodcastailtrapIO. That's Mailtrap IO. I talk to a lot of founders stuck in the same spot. They've got a clear vision. They just need the right team to build or scale it. That's where Gearhart comes in. They combine AI, real engineering and product thinking to help B2B SaaS founders move fast from early idea validation to scaling real products. For over 13 years, they've helped launch more than 70 platforms, including SmartSuite, which raised $38 million and is used by companies like Capital One Bank. Through the end of September, you can book a free strategy session and get 20% off validation, discovery, prototyping or embedded engineers. For your existing team, visit Gearheart IO. That's Gearheart IO. Hey Todd, welcome to the show.
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Todd Olson
Great to be here. Thanks for having me.
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Omar Khan
My pleasure. Do you have a favorite quote, something that inspires or motivates you you can share with us?
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Todd Olson
Yeah, I have a lot of favorite quotes. I'm going to give you one that's more topical today because he just passed away over the weekend. Fred Smith from FedEx. I saw him speak last October and he says if you don't like change, you're really going to hate extinction. So I'll go with that. It's my favorite quote right now.
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Omar Khan
That's awesome. So if there's anybody out there who doesn't know what Bendo is, tell us, what does the product do, who's it for, and what's the main problem you're helping to solve?
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Todd Olson
Yeah, so we're a software platform. We build essentially a software solution that helps other software application improve their experiences to end users. So we embed ourselves. We're like part of the app itself. We capture essentially all the behavior that's happening inside of the application. We then provide feedback back to the owner of the application, either the builder or person who owns it for the organization, and we give them feedback on how to make it better. Where users are getting stuck where they're not getting value. And then we also provide ways in which to, when you see that, help get the user on the right path, help onboard, help sort of make sure the user is getting full value out of the platform. So in a world where everyone's buying software and software runs most businesses, you make sure your users are getting like the maximum value out of that software.
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Omar Khan
Cool. And give us a sense of the size of the business. Where are you in terms of revenue, customers, size of team?
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Todd Olson
Yeah. So we're comfortably north of 200 million. In arrangement, we are roughly 870ish, maybe 80ish people.
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Omar Khan
Today you've raised about 479 million.
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Todd Olson
That probably includes sort of like secondary and things. It's probably closer to 350 in primary capital. Yeah.
- [06:07]
Omar Khan
Great. So Penda was founded in 2013. I think you shipped the first version of the product in 2014, but you have an interesting background before that. So as you and I were talking earlier, before we started recording, your first startup failed, your second one was acquired and then your third one was Pendo, and that was one that exploded. So maybe let's start there and talk about your. Well, why don't we just talk about what you were doing when you were 14. That's probably a good place to start.
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Todd Olson
That wasn't a startup. I was working at a bank. But yeah, I started a programming professional at 14. My mom was talking to some neighbor and she suggested that I was good with computers. And I think of course what she meant was I was better at computers than she was, which it's pretty low bar at the time, but I got hired and you had to fill a lot of paperwork. Turns out when you're 14 to get a work permit and things such as that in the US but ultimately it was an amazing experience. I think through that I kind of started programming macro languages on spreadsheets. By the time I left, I was full C C databases. You sort of name was just a lot of self, you know, a lot of learning, a lot of working with customers in a real business setting. I mean, I packed a suit to high school every single day. I went every single day after high school, put a suit on. I worked pretty much every afternoon, every Saturday. So I was pretty hardcore. I mean, I loved working back then. Loved making money, loved working, still love it. So, like, you know, I guess now at my age, that's working professionally for a very long time, so. And I see no stopping in sight.
- [07:55]
Omar Khan
So you had that love for computers, for tech, for coding, and there's a, you know, at an early age, at what point did that become, I guess a bug for building startups?
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Todd Olson
Yeah, you know the interesting thing because I started working at a bank, I kind of just assumed I saw these bankers, they're living great lives and I'm like, I'm going to be a banker, like a wife, pick a fence, whatever. I just assumed that that would be my path. I got exposed to a lot of executives there. I was like, oh, I can be an executive here. That seems like a good job. So interestingly, as the bank got bigger, I think what I didn't realize at the time is I joined a Bank in 1989. That bank was kind of a startup. I don't think I appreciated it until later because when I went to college and come back periodically, I'd be like, whoa, there's a lot of paperwork, there's all these books everywhere, everything's so slow. It had really grown from a startup to a full blown big company. And I realized, ooh, I don't know if I love this as much as I did in the early days. So that was a first sign that maybe something a little earlier, smaller, scrappy, more entrepreneurial was more my vibe. And then in college I sort of got exposed to entrepreneurialism. I started my first company, the dot com boom, like Netscape was created as a business. I was at Carnegie Mellon. I mean you go to a job fair and it's everything from the classics, The Microsofts, the IBMs, the folks like that, which a lot of people from CMU went to. But then you saw these upstarts, Netscape was there like what's Netscape? And I later on the browser. But I started getting exposed to Silicon Valley startups and I'm like, huh, you can do this on your own. And I think I met my first co founder back then. He had started a consulting company locally. He needed someone sort of help on the technology side. And I had all this technology experience and real world experience working with real databases at a real company, not just like theoretical in college. And it was just a really, really good fit. And that sort of was the birth of my first startup that started called Vision Systems became Sara Bellum Software. But yeah, we raised capital. Yeah, I mean you're child by fire drinking from the fire hose. It was a lot of fun, a lot of fun, learn a lot. I mean those are good days.
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Omar Khan
So what happened with that business?
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Todd Olson
Well, I think a lot of us know what happened to the Internet boom. There was a bust somewhere around what, 2000, 2001. Somewhere in that range. And we sort of got caught up on that. We had this opportunity to get acquired by another company that we were quite excited about. It would have been a very good outcome. I think there's an adage that time kills all deals. Right. So I live by that outage or that adage now, but me in general, our board thought we were too young to negotiate a transaction, so they brought in someone else and it sort of killed the deal. So that kind of the company board, Bri pivoted to be a services company and I kind of left after that. So that's kind of what happened to me. And yeah, it wasn't my happiest time in my life, I'll be honest. It was my life. And then one day it was gone or felt gone. So, yeah, it was big learning. Obviously. Don't count your chickens before they hatch on acquisitions. Once we got the offer and we signed it, I assume it was going to be a done deal. It wasn't. So a lot of lessons.
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Omar Khan
So how did that change how you thought about building businesses and what led you to basically trying it again?
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Todd Olson
Yeah, so I guess a couple things happened. So right after that, I got recruited by a company here in Raleigh, North Carolina to come run Tech Form. And I figured, look, I'd worked at a large bank. I started my own company. Here's like another sort of like real software company. Not a bank, not a good, pure startup. It was a little bit bigger. That's a real software company. Like maybe go see how someone else runs it and maybe I'll learn something from it. And so I did that. And so I do think, well, I would consider myself sort of a lifelong entrepreneur. I think I have in a couple instances worked for other businesses where I kind of saw another way of doing it. And I think that's always really good. And I pulled things out of each one of these companies into where we are at Pendo that I liked. And there's also things that I saw them do, like, I'll never do that. That seems dysfunctional. So I think it's combination of like, working for someone else was really informative for me and I gained a lot of knowledge and experience. If I just started my own companies, I would have learned obviously different things. But I think this has really helped me take all into what Pendo's become. And then my second startup, I started with another individual, another co founder. And look, I'm pretty transparent about this. At the time, I felt like the CEO of the Company had to be someone from a non technical background. I have no idea why I thought that. Like, in hindsight I feel like I was an idiot. So, but, so I the, this head of sales that was a close friend of mine, I was like, you should be a CEO and good person. But yeah, that didn't work out for a variety of reasons. And that, I mean that company suffered from just real like failure to get product market fit. Actually, probably both the first two companies failed to get product market fit. I'm telling you. I read the book Four Steps to the Epiphany by Steve Blank. I think it's a fantastic book. I'd encourage any entrepreneur to read that book. But I read it after my first two startups and I felt like it was speaking to me. I mean, it felt so personal and I was so angry at myself that I had myself and not thought of all these ideas. Like, how did I miss this? Like, I'm not a stupid person, like, but like, clearly this is a new way of thinking and I think all that knowledge, all that experience is what went into Pendo. And we obsessed over product market fit. Obsessed over it. And if you think about it as an industry, that term product market fit was probably popularized around the time Pendo was starting. Like I'd say that 2010ish to 2000. You know, we started in, you know, late 13, early 14. But that's when people really started talking about it. I remember Bradfeld, great venture capitalist, wrote a great blog on product market fit that I would reread almost every week. It was a masterclass in product market fit. And it guided us at Pendo in the early days. And I obsessed over fit and I promised myself that I would never prematurely scale until we started seeing signs of fit. And that's really the failures of the first two businesses. We didn't obsess over fit. And because once you get product market fit, it hides a lot of other problems, it makes kind of everything else a little bit easier. It's really that first milestone that you need to hit and you can't skip it. You can't hack it. You can't. Oh, I'll just do that later. No, you can't. That's ultimately why Pendo has been a great business, is that we found fit like we ultimately found great product market fit. You could probably argue we still have great product market fit. I think in a world of AI we're trying to discuss internally, does it change our current fit and or give us an opportunity to find some new Fit. So even as a founder, I'm spending more time in product than I've ever been before because fit is something you can lose. So you have to pay it. You have to like hyper focus on it. But it's the fit that makes everything else here work.
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Omar Khan
So the difference with your second startup was it was acquired by Rally Software and you went to work there for a while. And is that where the idea for Pendo sort of came about?
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Todd Olson
Yeah, 100%. 100%. I think a couple things I pulled away from that. Yeah. So I was able to get a good soft landing at that second startup at a company called Rally Software, which ultimately was a good outcome for the business. I think for both parties, for Rally and for us, I think it was deals are good when they're win wins. I think it was a win win. And I love that company, I love that culture. Yeah, I think they had great core values, they had a good, experienced leadership team. And I grew a lot, grew a lot there. And yeah, in my sort of like ultimate role there as head of product, I live the pain that Pendo basically now solves. And I was the, you know, I mean this Chief Product officer is the core Persona that Pendo sells to even today. So I kind of in that, that sort of on site customer, like even now I go around play it on the product. Like what do I get value out of this and what do I think of it? Like I, I'm the ultimate customer for this product. So, so that sense, it's kind of fun building for yourself and scratching an itch. I mean like, like it's, it's, I think it's. And then, you know, the other way you think about it, is it like an investor or even employee? Like I am uniquely suited to self solve this problem because I've, I've, I, I've live, I walk in these shoes or I have walked in these shoes a lot. So that's where I got the idea. And I was trying to experiment and do some of the stuff manually at Rally or Rally had some of these tools, but I just became really, really familiar with the problem and sort of gotten really obsessed over the problem. So you got to fall in love with the problem and then that's where a company's born.
- [18:18]
Omar Khan
How did you go about validating this idea? Was your personal scratching your own itch, your pain? Was that enough to give you confidence that you were solving a painful enough problem or did you have to spend time really going out there and making sure that others had that pain?
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Todd Olson
As well. Yeah, of course. Yeah. Look, when I'm 11 years in and I still have a lot of ways to go, I think. So these are big decisions. I think it's a big decision. So, no, I didn't take it lightly. I actually validated the Pendo idea and several others. I had several other ideas. One, one consumer idea, other B2B ideas. And no, I went out, I validated to venture capitalists, hey, you know, I'm leaning towards this one, the Penda one. But I got these other ideas too. That boy, they feel like real pain too. And we could put Bill like. But you know, all the feedback came back to say, hey, you, you seem like more suited to solve that problem than these other problems. And so I kept coming back to it and that's like a pretty good measure if you keep coming back to something, like, you just can't let go of it. Like, maybe you are the person to go start that thing, you know, versus something like, look, there's good days and bad days in starting a company. You do have to kind of love the problem to get through both the good and the bad days. Yeah, I think that's really critical.
- [19:53]
Omar Khan
So what did the first version of the product look like? What did it do? And I guess probably more importantly, how did you decide what you were not going to build in the product on that V1?
- [20:05]
Todd Olson
No one's asked me that question, which is always unique to a question I don't think I've ever been asked publicly. Look, I think I had a couple core tenets of what I thought was really important in the product. One, I think one of the things we're known for is in the world of sort of analytics or product analytics specifically, all the prior solutions to Pendo required developers like hand instrument or write track events to capture data manually. I was absolutely convinced that this long term was a bad idea because I experienced it. I had teams forget to put the track events in or I'd have teams like, well, that's old. We're not going to waste our time doing that. I just know why it's a bad solution, right? So I was like, day one's got to be auto track. And so that we knew that had to be part of the original solution.
- [21:01]
Omar Khan
We.
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Todd Olson
Didn'T want. We wanted to provide people high level visibility on what their users were doing, but we also wanted to be B2B. So day one, we had this concept of customer whatnot, we call it account. Today, no other product analytics company had really thought about the B2B problem. Most of them, all of them had all sort of come from a replace Google Analytics world. So I think B2B was also in the first version. So AutoTrack B2B analytics must haves for like version one, like literally even the beta. The second thing I was pretty passionate about, I never wanted to be a company adjusted analytics. And that's probably the thing we're most known for after those two items is that we built in app messaging guides in the same install in the same platform immediately. Like within weeks after we delivered our first analytics build, we had a guides build out and we had built a very rudimentary sort of visual builder both for the guides and for like tagging analytics that we knew would be the same sort of like UI construct and that was kind of version 1.0. You know what wasn't in there? Date picker. Like you literally couldn't pick the dates. We picked it for you. Obviously no dashboarding, no sophisticated dashboarding. But you know, I think we also, we did some innovations that were pretty fun and clever back then. I mean it's still, we're known for like, like every product. Even today. Most product analytics vendors have notion of a session. A session is like a start and end time when you start using something. And I was like, I don't know about you, but I got like a hundred tabs open and I'm toggling between tags like, is it really like what's a session anymore? Like I'm just doing stuff like, and it's like thinking in terms of like a session feels like, oh, we do this because Google Analytics did this 10 years ago and we all feel like we need to be parody. But like, I think it's actually kind of a useless metric how many sessions I had some of our competitors charged on session. Like, I don't even know what it means. Like, like, like if I'm in one tab and I go to another tab and come back, is that a session or a different session? Or I'm just like context switching? Like I don't know. So we, we just didn't, we actually built it. I saw it and I ripped it out before we ever shipped it to customers. So, so code may still exist for how do we do sessions inside. Like we actually still have not shipped it because I was like, I think this is dumb and old and I don't want to do it. Yeah, actually fast forward today we actually do have some sessions around Replay because we had to do that for that product. But it's actually implemented differently than we Originally did it. So I do think that's the. Those are the kind of design choices that we've been really specific. Another great point, I said every other solution did these track events. That was the way to do it. I didn't build track events for almost five years. Five years didn't build it. So very bold. And nearly everyone at the time was using something like segment, which is now part of the Twilio portfolio and they're using track events. We were the only one who didn't yet, I mean sitting here today, did it really matter? Obviously it didn't matter. I think it's what you say no to is what creates opinions and products.
- [24:35]
Omar Khan
You ship the first version of the product. Just talk me through what the journey looked like to get to those first 10 customers because, you know, the pain is real. But were people looking for a product like this at the time?
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Todd Olson
No. Well, okay. Not actively. Yeah. So like look, you build something and you know, we're trying to iterate on it and sure, like any, any startup that's in a, you know, incubator of sorts, we're like, let's do it on the Internet and do some BLG and people will just sign up for it. Well, no one did that. No one was searching for I need product analytics plus in app guidance in the same package like that. That wasn't a thing. It wasn't a category. Still arguably like sort of a nascent category even today, you know, and we're a pretty decent sized business and there's a other players doing it. But, but certainly then no one was searching for it. No. So it doesn't work. So I started outbounding what any person would do and so who do I know? Well, I know the VC community and because of, I was raising capital and talking to people and I would, I, I did a ton of calls with VCs and I just, my, my ask was simple. I'd love to get introduced to four or five portfolio companies. Here's my top five picks. You mind connecting with founders or I reach out on LinkedIn to other heads of products because I've a former head of product like hey, I'm a, I created this company because I had this paint. Do you have this paint? And because of, I have a decent background, I would get those meetings or people maybe knew me from rally. So I mean obviously I have Rolodex as well. I'm bringing and I'm describing and when I described why I built the product and the pain I was living, I'd get head nods. And I would get, that sounds interesting. And I'd say, look, our solution requires like, no engineering exists. He gets this, like. And all my ask was very simple. Will you try it? Will you try it? So. So the first year of Pendo's existence, we only measured installs, just installs. Because guess what, to use our product, you actually have to put like a snippet of code in your product. I thought that was a hard. I thought that was a high bar. I mean, turns out now thousands of people probably do it a month, but at the time I thought it was a really high bar. And so we counted installs and I remember we got 6 and then 20, 30, 40. Finally in October of 2014, we had close to 50 people using it. And we clearly saw some customers using it a lot. Like probably weekly active use at least. So I called up the customer. The first one that I really thought was truly using it most, I was like, look, you're using this a lot. Like, I think some people were like screenshotting Pendo charts and giving it to their board directors. Like, you're giving this to your board directors. You should probably pay for this, shouldn't you? I mean, it feels fair. And then of course, I had some aspirational price. They had a very different price in mind. But we, we came to an agreement and we closed our first customer October 31st of 2014. Fun fact, they are still a customer today from 2014 to 2025, still a happy customer.
- [28:01]
Omar Khan
How much did they pay you the first time around?
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Todd Olson
$500 a month.
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Omar Khan
Good start.
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Todd Olson
Yeah, it was a good start. And now they pay us more. I don't remember exactly how much, but definitely more. And then off to the races. And I was like, okay, well I just sold one. I can probably sell more. So we ended the year around 6 paying customers. And then we started out the next year and the goal was just continue to have me sell. So it's just like founder led sales. Of course, at this point, your board, you're kind of seed stage board, who by the way, boards. All boards, by the way, but in particular investor board members, in particularly earlier stage, everyone's just pattern matching. I saw this pattern at this company. I kind of see it here. I'm going to share that pattern with you and you can sort of like, I'm recommending you do it. But so people were pushing me at the time to hire salespeople. I just kept saying no, like they would get a little mad at me, but I'm like, look, I Don't think hiring salespeople is what we need to do right now. I think I need to continue validating it. We're still getting good product feedback. And here's the deal. When you're in these deals and you're in the cycle, invariably you're trying to get a customer and guess what things are missing from the product. There are things are missing. I mean it's only a year old product at that point, or even less than a year old. So they're like, hey, can you build this? And I'm sometimes saying yes and sometimes saying no. And then that sometimes wins the deal and sometimes doesn't. I'm like, ugh, no, we're not going to do that ever. But then sometimes you'd be like, hey, I'll never forget we were talking to this prospect and like, hey, you got these beautiful messages inside the product, you know, like, but I really want to get feedback from the end user. Like I want to ask them questions and like do surveys and polls. Like, can you build that? Like that's a really good idea. Yes, we can build that. I went back to my team, it's like, how fast can we build that? And then, you know, I got some estimates, like let's cut that in half and figure out a way to get it done. So we did and that we won that on our then largest customer at the time, you know, by delivering this new capability. And that was kind of how it went in the early days. It's like assume your product is a bit of a blank canvas and then you're like iterating and go to market. So staying very close to those sales is your early way to get fit product. Market fit. We found fit for during the founder led sales period of iterating on the product to the point where yeah, we got emotion down pretty good. Like that's how you get like the bet. Okay, now the product's at the base level of features that we're going to win a bunch. And then we started pressing the gas, then we hired sales reps, then we started training people. But it wasn't until I had that confidence that yes, this is replicable, like really replicable. We had a sort of emotion form that we didn't start like really pressing the gas.
- [31:04]
Omar Khan
What did you get revenue to with founder led sales before you decided to hire salespeople?
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Todd Olson
About a half.
- [31:11]
Omar Khan
About 500k?
- [31:12]
Todd Olson
Yeah. Close. Close to that, yeah.
- [31:14]
Omar Khan
What I think is also interesting is that you know, you with Pendo, there's been a lot of focus on Product led growth. You've written a book on the product led organization but you didn't do any product led growth with Pendo for quite a while. Right. It was about founder led sales, it was about building outbound sales and yeah.
- [31:37]
Todd Olson
And yet we sell being product led. Yet we ourselves, you know, for a period of time didn't do as much of it. Right. And I'll caveat in my book I even talk about there's a spectrum of being product led. Like when people think product led they naturally normally gravitate towards full service. Like there's no humans involved. Try and buy like completely, you know, digital experience, et cetera, et cetera. But, but I look, we always encourage people to try our product. Our win rates were much higher. People tried it. That's a form of being product led. We've always had some sort of self service and like in product onboarding it's always been part of our product. So like we do that pretty well. I think that's clearly product led and that saves us sort of like it provides a great experience on the post sales side. So we focus a lot on the post sales side. But yeah, I think, I think the real why behind how we restructured a go to market was I guess based on really how new our market. We were creating a category. I think if we had an existing category that I was disrupting, PLG would have worked a lot better. I could say we're like this but better. There was nothing I could say we were like. So we had to explain it and that's why we actually introduced product growth later because our category had finally sort of caught up to us and we felt like it was more known and we wouldn't have to explain it as much. People kind of know what a Pendo is now. So I cut that whole part out of the funnel and I just now focusing on why Pendo's better and go experience Pendo. So like we have introduced, I think free is a huge part of our business, huge part of our business now. I mean like we have over 10,000 people using us in our free account regularly. We have you compare that to about the 3,000 paying customers. So three times the people use this in free and they're active users. It's a great product actually. So I think it's a big part of our emotion now. But we had to kind of grow into it oddly. And then the other thing, which it's probably worth saying we're all a bit at times victims of our own success and, and, and like our Sales team was just, I mean like when things are working like you tend not to mess around with it a lot. Like it was for like, like the sales team worked. Like do we had a pattern. Like we were tripling for years. Like, like, like when you're tripling your ARR, you're not looking to mess around with it a ton. Like you're like, add more fuel to the fire folks. Add more fuel to the fire. So I don't, I don't know. Once we started getting the real sales LED motion working, it worked so darn well that it's like, let's just go baby, let's go. And I think that's okay. That's okay. Finally we got to a point where we started looking at efficiencies. We started feeling we weren't serving a piece of the market that didn't want to interact with sales, which is like, again, well, sort of like TAM expansion. Like we, we, we, we, we sort of started to get to a point where we, we wanted to expand our TAM beyond the people who want to talk to humans, talk to people that don't want. So that's kind of like that was our why between adding it later. But yeah, yeah, it's all good.
- [35:05]
Omar Khan
So I want to talk about kind of figuring out who your, your ICP is. And earlier you said, hey, you know, I was this chief product officer, I was experiencing this pain. I kind of essentially wanted to build this product for myself. And today we sell in large part to CPOs as well. But you kind of had this journey along the way where you weren't quite sure who you were targeting, who your ideal customer was. What happened?
- [35:35]
Todd Olson
A couple things. One is yes, I knew I, I knew I had this pain and I knew that, that I could find other people who were like me to sell too. I think one of the early challenges is, you know, and I kind of referred to this a little bit is like you're sitting in a co working space, you're around surrounded by startups and you like the natural inclination is like, let's get more startups using this. Let's settle ourselves. People have been would die for this. So we, we did focus on getting small companies to use us. Challenge was is that small companies don't have a ton of money and they're just as discerning as bigger companies. So after experimenting among what we, we started, we started realizing is that it takes the same amount of time to close a bigger company. We just get like five, six times more revenue. So why are we spending Any time talking to these small companies and it felt bad, like abandoning people like these are companies like us, we're abandoning ourselves. But it's like, but the market's saying that the product market fits better up here than it is down here. So it was finally some realization that we needed to move up market. That really is what helped lead to fit. And we started talking to companies bigger than we were. Look, I think the other thing and I talked about the creating a new category and then how new our market felt. I think this was an ongoing challenge. A lot of people didn't believe that there was a category around product at the time. Conventional wisdom was marketing is the largest variable budget. You want to attack marketers and that's what a lot of folks in our space did do, is attack the marketing department. I will say I was sort of passionate from day one that we got to do product even if it's going to be hard. And. But that took work. We had to educate product buyers, hey, there's now new things you can buy. And oh by the way, this is how you like go get a budget line item for it. And I think we had to adjust our go to market and evolve it in ways that we wouldn't have had to if we attacked a different market. But ultimately that buyer was the right buyer for us over time. So I think that was a big part of our challenge. I think it's a big part of our challenge today.
- [37:57]
Omar Khan
Let's talk about pricing. I want to understand a little bit about in those early days when you sort of moved beyond. You started hiring a sales team, you're trying to figure out your go to market motion, what was going on with pricing. I know there was some kind of challenges you faced in terms of getting that working with your sales team. Just tell us a little bit about that.
- [38:22]
Todd Olson
First off, I think pricing is one of the most important, most important, sort of like decisions, strategic aspects of the business that people often don't spend enough time on and don't overlook. So I'm very passionate about pricing. I think it's incredibly important, especially in SaaS. It's your flywheel, like it is your flywheel. So I sort of obsess over this problem. Look, I mean early days again, we started off selling the startups so we naturally had like a, we wanted a low entry point. $99 a month felt very, very reasonable. We, we thought there's a volume game here, let's just sell a lot of 99amonth products. But, but when we had that skew And I was doing founder led sales. You kind of heard that I was having a little more success or I was like, I like going out to slightly bigger companies. So I wasn't actually selling $99 SKU. So fast forward a few months so we get closest to this, we get roughly around this half million ARR. I start hiring salespeople. They start they're outbound calling, I'm giving them the script I'm using, but they're just going after it. They're talking to anyone that'll talk to them back. And next thing you know, we started seeing this like influx of $99 deals and like my co founder's like, what's going on? We have the $99 deals that people don't value our product. I was like, no guys, we gave them a $99 product and we told them they didn't, they could talk to anyone they wanted to and they're selling it right. Like they're just selling smaller deals because like we didn't tell them not to. And this is on our price book. You know, I wasn't doing it. So I didn't even thought about focusing $99 deals because I'm trying to hit a number I need, I need to sell bigger deals at my numbers. But like the young people are coming in like they're loving it. They're like, you know, volume, like they're transacting. It was fun. But then I realized it wasn't attracting the right kind of customers because these are folks that thought we were a cheap solution. They weren't investing in it. It was hard to get them successful. So one day I came to work and I said our minimum price point is going to be $1,000 per month. And everyone freaked out. Like mind you, they're selling a ton of these 99amonth products and I'm literally coming in saying it's 10x more expensive like the next day. And they're like, we'll never sell another deal again. That's what people are thinking. But guess what, we sold just as many deals now at 10x price. So that's when we really started growing. Honestly, that simple pricing move and pricing adjustments and honestly lifting price has been the thing that has ultimately driven a lot of our growth and been like probably some of the smartest decisions we've ever made. And it also forces you to move a little more up market, but it also forces you to go to a buyer who cares, who cares about getting a premium solution or a better solution. You know, like if I'm someone's just buying me because I'm the cheapest thing. I'm going to get treated like the cheapest thing. So no, I think it's been great for us.
- [41:36]
Omar Khan
So interestingly enough, you moved to that minimum thousand a month, but today you're back to a free plan as well, right?
- [41:44]
Todd Olson
We have free. There obviously are some gates on it, but yeah, the minimum was 1000 for years. Now we reintroduced free. But look at the average Pendo customer pays almost 100k average. So. And that number has steadily increased over the years.
- [42:07]
Omar Khan
Looking back at sort of building this business, like what would you say has been one of the, you know, I mean a lot of people might look at this and say, you know, Todd kind of, you know, had this idea, got into the market at the right time, it's kind of built this huge company doing well over 200 million. ARR. What's, what's been the single hardest thing about building this business for you?
- [42:31]
Todd Olson
I mean it's all hard. Like, like if someone thinks it's like magically easy, like, like that's not, not, not the thing to go do. So look, I, I think the, the people stuff, getting the people right, finding the right people, scaling. You're going to make a bunch of mistakes. You're going to hire some wrong people. The higher they are in your organization. The worst of ripple effect it's going to have on the rest of the org. I mean that's ultimately been my toughest decisions, my biggest mistakes. What's probably held the company back the most over time has been that.
- [43:03]
Omar Khan
Is it true I read somewhere that you personally done like 800 interviews?
- [43:06]
Todd Olson
Yeah. So when I started the company, I interviewed everyone. Finally, after about 500 employees, I stopped. And actually, and that's hard one, I admittedly hate giving up the control, but if you looked at my schedule, I was spending like about 40% to 50% of my time interviewing people. But now you gotta teach other people how to do it right. And it is a hard thing to teach. And we make mistakes and when we, sometimes we make a mistake, I'm like, if I would interview that person, I probably would not have made that mistake. But, but in the end they, you're like, no one's learning if you're catching everything. And that's what like ahead of people can't come in. She kind of convinced me to do it. She's like, you're the crutch everyone's using in the company. We gotta stop relying on this crutch. And she's right. We did. And, you know, hopefully it'll make everyone better. But I think the people. Things that to me is like, that's, that's the hardest part. So building and scaling anything. Sure.
- [44:10]
Omar Khan
All right. I would love to keep talking, but we should wrap up. We're almost out of time, so we're going to get onto the lightning round and I've got seven quick fire questions for you. Okay. What's one of the best pieces of business advice you've received?
- [44:22]
Todd Olson
I think focus on prioritize the things that only you can do in the org. And what I mean by that is there's lots of things that you can do that a lot of other people can do, but what are the things that you are uniquely suited for or only do? So if you look at my schedule, if there's like a CEO event or something, like, I'm the only person at Pendo that actually is allowed to do that. I tend to do most of those things. That's how I know what to say yes to and what to say no to.
- [44:47]
Omar Khan
You may have already answered this one. What book would you recommend to our audience and why?
- [44:51]
Todd Olson
I've already recommended one. I'll give you a second one, though. Good to Great. Jim Collins Masterclass. Amazing.
- [44:58]
Omar Khan
What's one attribute or characteristic in your mind of a successful founder?
- [45:02]
Todd Olson
Grit. I mean, yeah, it's what you need.
- [45:07]
Omar Khan
What's your favorite personal productivity tool or habit?
- [45:10]
Todd Olson
I mean, right now it's like ChatGPT is pretty damn useful, so I'll go with that one.
- [45:17]
Omar Khan
What's a new or crazy business idea you'd love to pursue if you had the time?
- [45:21]
Todd Olson
Crazy business idea. Honestly, man, I'm all in on Pento. I do not think of other ideas for now. I think it's still crazy, but I love it.
- [45:31]
Omar Khan
That's all that matters, right? What's an interesting or fun fact about you that most people don't know?
- [45:38]
Todd Olson
A lot of people know that I have a lot of kids. I have six kids. But I guess that is a pretty fun fact, so I'll go with that one.
- [45:44]
Omar Khan
And finally, what's one of your most important passions outside of your work?
- [45:48]
Todd Olson
Food and wine. Outside of my kids too, of course. I love my kids. Well, that was too fast. But it's lightning round.
- [45:58]
Omar Khan
That's right. Yeah. Cool. All right. Well, Todd, thank you so much. Been a pleasure to chat. I know you're a busy guy, so I appreciate you making the time. If people want to check out Pendo, they can go to Pendo IO if folks want to get in touch with you, what's the best way for them to do that?
- [46:13]
Todd Olson
Just toddendo IO Sweet.
- [46:16]
Omar Khan
Thank you so much. Congratulations on everything you've done with this business. Looking forward to seeing what the future holds and where you where you take this and I wish you and the team the best of success.
- [46:28]
Todd Olson
Thanks man. Appreciate it. Have a good one.
- [46:29]
Omar Khan
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