The First 100 | How Founders Acquired their First 100 Customers | Product-Market Fit

[Raised $161.3 million] Ep.91 - The First 100 with Waseem Daher, CEO and co-founder of Pilot | Founder-led Sales

August 19, 2023 Waseem Daher Season 3 Episode 6
The First 100 | How Founders Acquired their First 100 Customers | Product-Market Fit
[Raised $161.3 million] Ep.91 - The First 100 with Waseem Daher, CEO and co-founder of Pilot | Founder-led Sales
Show Notes Transcript

Waseem Daher is the CEO and co-founder of Pilot, specializing in bookkeeping, tax, and CFO services for high-growth technology startups. He is a three-time entrepreneur with two successful exits: His first company, Ksplice, was acquired by Oracle in 2011, and his second, Zulip, was acquired by Dropbox in 2014. Pilot has raised $161.3M from 24 investors, including Empede Capital and Akkadian Ventures.

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Let's do it. Broadcasting from around the world. You're listening to the first 100. A podcast on how founders acquired their first 100 paying customers. Here's your host, Hadi Rodwan. Basim, good to have you on the show. How are you doing today? I'm great. Thanks for having me. Amazing. I'm a big fan of your newsletter. I read it quite often. It's size-biased. It's very straight to the point. And me, as a startup founder, I can get the advice I need without having a mentor that's not sitting next to me, because you've done it three times. And the recent one that you started, Pilot, which you are. the CEO and co-founder and Pilot specializes in bookkeeping, taxes and CFO services for high growth technology startups. And you've done two successful exits before that. One is K-Splice that was sold to Oracle in 2011 and then Zulip which was acquired by Dropbox in 2014. And so far, Pilot has raised more than 160 million to date. It's a unicorn, I believe last time I read. So... Before we dive into all of this, did Yung Waseem exhibit any flashes of entrepreneurship early on? It's a good question. I think I always liked the idea of having my own company or doing my own thing. And it's probably because of the entrepreneurial background in my family. And you and I were talking about this a little bit before the show, which is my family is Lebanese. They all moved from Lebanon. the US in the 80s. And I mean, everyone, my parents grew up in this tiny village, and basically the entire village relocated to the US and mostly around in mostly around Cleveland and Ohio. And many of my aunts and uncles had their own businesses and maybe it was a coffee shop or a bar or a gas station or something like that. But I think there was always sort of very deeply ingrained, the kind of American dream this idea that, you know, you could come to this country and build this new thing. Look, I was born in the US. I didn't have to face the challenges that they did, but I think seeing their examples sort of demonstrated it was possible to have your own business to be successful at it. And I think that was always a bit of an inspiration kind of in the background. Amazing. You started the K-Splice, which was a technology company that made it possible to update running Linux systems without rebooting. Then you found it another company called Zulip, which is an open source. chat and collaborative software, which is I think an alternative to Slack. And now you're in the accounting world. So three distinct areas in different industries. First, how do you choose what problem to solve? But more importantly, how do you solve for industry expertise? Because I believe that your co-founders, which have been in your previous as well enterprises, none of you are CPAs. Yes, that's true. So two things here. First. I definitely think it's critical to start with team before you start with idea. Meaning, as you said, the three companies we've done have really all had kind of that same core group of people. And that was actually an important part of it, which is when we started the second company and when we started the third company, the desire was, okay, let's get the band back together. Let's first identify the founding team. Let's make sure we all want to do it. Let's all get in a room together. And then let's talk about what are we going to do together. And as you can see, we've worked on three very, very different things with this kind of the same core team. And so for me, it's much, much more about the team than the specific concept. I think the team is much more critical. Then for the specific concept for each of these companies, even though they seem very different Linux kernel updates, group chat, and accounting, the common thread was that there were problems that we ourselves very viscerally had. So the first company. was based on my co-founder Jeff's master's thesis. And it was about pain that he and we had administering Linux servers. We wanted to keep them up to date so they didn't get hacked. It was a pain to come in at Sunday at 2 a.m. to reboot them. In other words, we were solving a problem that we had. The second company, the same thing was true. At the first company, we had assembled this team and we said, well, look, it's actually hard to keep everyone in sync. Email is too slow. The existing status quo on chat isn't very good. fine, we have this problem very painfully, we're gonna solve it ourselves. And then the third company had the same formula, which is in the first two companies, you know, you wanna spend all of your time building the product or talking to customers or getting sales or writing the code or whatever it is. And we found that we were spending all this time on accounting and legal and HR, like the back office work, and that we thought we could do it better by injecting AI, by injecting software, by actually like having the computer help out, was kind of insight one. And then insight two was, look, we and business owners or startup founders don't want a piece of software. You want someone who's actually on your team who actually gets this done for you. So we said, we're gonna do this kind of unorthodox thing. We're gonna hire a team of accountants who are full-time employee of ours who sit in our offices, and we're gonna build superpowers for that team. We're gonna build the Iron Man suit for them. And so even though these all seem extremely different and they are very different, the commonality between all three is that their problems that we ourselves very, very painfully had in our previous parts of our journey. So we knew that there was a need and we knew we could solve it. If we look at your early acquisition strategy in each of these three different companies that you've set up, tell us a little bit, how did you find these customers early on? And if you had built over you experienced a certain sales playbook which has evolved and then in pilot you said you know what this is tried and tested let's do it again and probably it would work any insights that you can give us here yeah so the reality is there's no silver bullet here it is it's not rocket science there's not a magic trick you just kind of have to put in the work and here's what i mean for a given company like right when you're starting it you have some hypothesis about the world and in The hypothesis was initially, startup founders are not very well served by their accounting firms today. And we have some theories as to why, like it's not very modern, it's not very tech forward, they don't really get startups, et cetera, et cetera. So we had some hypothesis. And note that the hypothesis is very specific. The hypothesis was not, business owners everywhere in America have a problem with their back office. The hypothesis was very specifically, technology startup founders are not well served by their existing accounting firms. They just don't get startups, they can't scale, etc. So you have this hypothesis and then the question is like, fine, how do you test the hypothesis? Well, you have some sense of who the target customer is. And so then the next step is find three examples of someone who fits into that ideal customer profile using your network, go on LinkedIn or ask your friends or whatever, and talk to them. And you're talking to them not to sell your product, you're talking to them to say, you know, I'm working on a new startup, I want to hear about what your pain points are. Like, what are your top three hair on fire problems? You hear about that you listen and you say, Oh, well, this is what we're up to. Like, does that sound painful to you? Is this a thing you would pay for today? Like if I could sign you up today? Would you give me your credit card? Would you pay me, you know, $600 a month for us to do your accounting? So in other words, you're pressure testing the idea with some initial customers. And importantly, you have to really ask for the sale. You have to say, well, I'm not asking, does this sound good? I'm asking, would you give me your credit card right now? Would you sign up? And the reason you have to ask the question that way is because people want to be nice. People don't want to be mean about your idea. They're not going to tell you, oh, it's stocks or it's a bad idea. Don't do it. They'll say, well, you know, it sounds pretty interesting. Yeah, maybe someone would like that. But someone is not a customer. Like you need a specific person. So the question is, Hattie, would you give me your credit card right now to sign up for pilot? And if you tell me yes, great, I'm onto something. And if you tell me no, well, also great, now I have an opportunity to learn. I'll say, well, fine, why not? Like, maybe you tell me, well, this is not really a pain point for me. Actually, I'm much more concerned about my, you know, finding a good lawyer or whatever. So you do this kind of customer discovery work with your initial customers, and you either find that it does not resonate, in which case you either need to improve the pitch or maybe your idea is bad, you need to find another idea. Or you find that it does resonate and then they bite. And then the final question that you're gonna ask all these folks is cool, are there other people in your network that you think I should talk to that might also have this problem? Because your customers know other people like them. And so that's really kind of how you do it, which is you get your first customer, you make the experience super good, and then you ask them basically for their like two or three friends that they think might also benefit from the product or from the service. And if your thing is actually compelling, if this is really a problem they have, they will be willing to introduce you. And so to answer your question, well, how do you get these initial customers? Well, again, I don't think there's a magic trick. I don't think it's do a big launch on product hunter, you know, get a viral thread on Twitter, like sure, if you can do those things, great, like do them. But I think it's much more just like put one foot in front of the other, use your network to find your first three potential people, potential customers, and really treat them as advisors, help, let them help you craft what it is you're building. and ask them to refer other people in their network because if you're doing a good job, they know other people who have this problem or have this pain. And you just kind of rinse and repeat that motion. Amazing, and this is a little bit non-scalable because eventually you would need someone next to a seam to go out and do the same thing over and over again. So if you wanna scale it from 10 to 100 customers, how would that change now? You've proved product market fit, people are willing to give. you money, you've known that your product is also the pain point. Now what's next? And in the case of pilot, of course, I sold the first hundred counts myself. And so I think like founders should stay closer to this than people think. People think like, oh, you know, it's working, I need to hire a sales rep, let me scale it up. And the reason I don't like that is because let's say you hire someone new. And look, sales is hard. I have a lot of respect for the role of sales. It's a very, very tough job. And yeah, you know, it is an art into itself. The problem in the early days, if you hire your sales rep too early and then it stops working, you're not going to know why. You're not going to know whether it's because there's something about the product or the messaging that isn't right or whether it's, well, maybe you just hired the wrong person for the role. You won't actually be able to tell those two things apart and you're putting a middle man, a middle person between... you and your customers which are where you're gonna learn so much about what's working what's not working i think lots of people try to go to this too early because what they recognize is this is hard like this is a hard job and a little bit of them says well i don't really want to do it. And unfortunately what i've learned in startups is you can't shy away from the hearts of you actually have to do it. And in the case of sales specifically i think it's so healthy and so important that one of the founders. get really, really hands-on and really involved in the sales process. I literally, again, I sold the first 100 customers a pilot. And then once I had done that, and once I felt like I really understood the playbook, we hired our first sales rep who was, she was awesome. And she and I just like sat side by side. We did it together for probably the next 100 accounts before she was really off to the races. And so I think, yes, this is not scalable. But again, to get the first 100 customers, I think in some ways requires doing things that are unscalable. It's not just about getting the sale, it's about getting the knowledge and the stuff you're gonna learn from engaging with these folks about what they like, what they don't like, what causes them to tell their friends, what they wish could change. All of this stuff is super valuable to you in the early days as you think about how to run the company and where to emphasize your time. Thank you for the advice. If we go back to your playbook today, how would you repeat it? If I'm today a founder listening to this, I sell enterprise solutions. Maybe I'm an engineer. by nature, so sales is not easy to come. So first question is, how do you augment yourself? Where do you go and learn? Or maybe resources that could help that founder augment his sales capabilities. If you were to give us tips and tricks on where to start, where do we draft teams? Where do we find these accounts? Should we travel to conferences? Should we not travel? Is Zoom enough? I'd like to pick your brain on this. Sure. So on the first one, and you mentioned my newsletter at the beginning, Har. I have a post called sales advice for the technical founder at And listen, the story for us and our previous companies is all of our founders were MIT computer science people, including me. And so we didn't know anything about sales and we had to just kind of figure it out the hard way. The reality about what you're trying to do in the early days, like it's not rocket science. There's no magic trick. What you're really doing is you're having a conversation with a person. You're trying to understand what are their pain points. what problems do they need solved? And then you're trying to decide collaboratively with them, well, do I have a thing that can solve your problem? And if I do great, let's do it. Let's work together. And if I don't, well, I should just tell you that, like, people think that sales is about like tricking you or convincing you or like, it's really not it's really the best sales experience feels people like this kind of word consultative, which is like you and I are working together to solve a problem you have. And I happen to have the solution to your problem. And if I do find, let's talk about how we can make it work. Like, especially with your early customers, that is how you're gonna wanna approach sales. Now there's some tactical stuff you need to do, right? You have to follow up. You need to like make sure you know the status of everything. Like your job is basically almost like project managing, getting you to try the thing and like it and to use it and to tell your friends, et cetera, et cetera, et cetera. And so there's a certain amount of like discipline and rigor that's needed to do that successfully. but you're a smart founder, like you probably do know how to do that. And I think that matters much, much more than, okay, what specifically are you, what CRM do you use, or are your meetings in person or Zoom, or do you go to trade shows or whatever? Like the answer to those questions is going to depend entirely on who the customer is and how they like to operate. Meaning for us, selling to startup founders in the early days. There were a lot of calls, there were a lot of Zooms. There was not a ton in person. Now for a different buyer, yeah, maybe they wanna meet you at the trade show. Maybe they want you to come to their office. It is very kind of buyer specific. As the company grows, you will formalize a bit more about how you sell. But in the early days, I'd encourage you not to have any preconceptions about what you're gonna do there. You need to do the thing that works. And if the thing that works means you have to get on the plane and go visit them, get on the plane and go visit them, fine, that's what you're gonna need to do. Yeah, absolutely. I think there's a famous quote by Tony Robbins, which says, repetition is the mother of skill. You got to repeat, fail, stand, move, learn, et cetera. But more importantly, we live in a noisy world. So today you get bombarded with so many people trying to knock on your door and try to sell you something. Maybe it's a good product for your pain point. But the question is, when do I open that door and respond to them? So in your case, that first phase where you're knocking on doors or you're sending emails. Is there any tips or tricks or maybe a framework that worked with you that has improved that conversion rate maybe from the cold outreach to the warm introduction? Yeah, so I think this is one of the reasons I really like the referral, which is that it allows you to bypass that. Yeah, I get a lot of cold email, I ignore 99% of it. But if someone I know emails me and says, is doing a thing I think might be useful to connect to you, I'm much more likely to engage. So I guess idea one is, this is really why you wanna lean on, you wanna bootstrap this network. You need to find the one person who loves it or who you're really solving the problem for. Ask them for three people that you think they should talk to. Ask those people for three people they should talk to, and kind of grow the graph from there, is I think idea one. Idea number two is remember in the early days, and I think it's very important to remember this, you're not trying to sell your thing. What you're trying to determine is if people even want it or what it needs to look like. And so I encourage, I think it's a huge mistake to be pushy about it. In the early days when you're reaching out to these people, look, people wanna help startups. Like people like this kind of David versus Goliath story. They like Thunderdog. And so I found I've generally had a very good reception if I email someone and say, hey, you know, I'm working on this new thing, it's a startup, and this is what we're trying to do. Like, I mean, I'm not trying to sell you anything, I just want to get your feedback about how, first of all, what is the problem you have, and like what you would want to see to make something like this useful to you. And I think in your early conversations, that's what you're looking for. You're not looking for, yeah, I'm gonna ask you, would you give me your credit card right now? I'm not actually trying to sell you a thing. I probably haven't even built the thing. What I'm trying to do is to assess, okay, is my hypothesis about what the pain point is actually accurate. And then you keep those people in the loop and if you in fact build the thing you said you were going to build and in fact it like really scratches their itch like yes they will eventually buy. But in some ways the more interesting thing to get in the early days is not the initial dollars it's the feedback about you know whether it's working whether it's not. And I think if you approach the conversation in that way folks are much more willing to help you. Because it doesn't feel like you're trying to. trick them or trying to separate them from their money, what you're trying to do is saying, listen, I need your help. I'm asking you for a favor. And I found that people are actually very, very willing to help you. Amazing, Tep, thank you for sharing this. Knowing what you know today, if you go back to your early days at Pirate, is there anything that you would have changed in your early strategy? You know, it's interesting because some of the things we've made so much more progress on than I thought we would have, and some of the things we made so much less progress on than I thought we would have. I think we really have been tackling it the right way and that's largely because there were lots of mistakes we made in our previous companies. And so it's been helpful in this third venture to say, well, here are all the things we did well last time, here are the things we did poorly, let's do the things we did well and let's avoid the things we did poorly. But in general, like what is general advice here, I think you can never be too close to the customer. I encourage folks to spend as much time, you know, with potential customers as they can. I think one of the founders basically exclusively has to be spending their time on that stuff. And the second is like, go fast. Like it is better to get the imperfect thing out there in the world and get people's reaction to it than to spend tons and tons of time getting it just right before showing it to the world because you actually probably don't have it right. There's probably a lot you will learn with contact with the real world. I guess the other piece of advice is like, don't fall too in love with your initial approach. You're gonna hear things from the market about what it likes and what it doesn't like. And you need to adapt to that. You need to internalize that, you need to digest it and figure out if you're hearing consistently, no, I don't want this thing, or this is great, but it would be even better if you did this other thing, you should listen to that. On that part of the question where you mentioned your previous companies, what did you have to unlearn from your previous approach in building startups that you didn't bring with you to pilot? Well, the biggest thing is probably around size. Our previous companies, you know, were like 15 or 20 people when they were acquired for each of them. pilot is like 300 people. And there are some things that you can do when you're 10 or 20 people that you can't do and you're 300 people, there's a lot you have to learn about just managing the organization and kind of like keeping everyone aligned. Like, when you're 10 people, you're basically aligned by default, everyone sits in the same room together, everyone knows everything, like, you know what you're doing and why you just like you get that for free. When you get bigger, you have to really proactively invest in making sure people understand the why and the how and how we're doing like So there's a, I think I had to unlearn skipping that stuff. In the early days, you just like, you don't need to do it. And as the company grows, you absolutely have to. Amazing, thank you for sharing that. How has the Waseem of the first startup differed from the Waseem of Pilot in terms of leadership? Well, I just know a lot more. I mean, I'm still learning obviously, but I feel like I just know a lot more about what to do, what not to do. One of the big takeaways from the first startup actually is I think we were not very thoughtful about market size. How big could it be if it's super successful? Really thinking through... In the first company, I think you talked to investors and what they say is, listen, if you want to be a venture-backed business, you need to be willing to do this for decades, literally decades. You need to make this thing a multi-billion dollar company for it to be interesting. And the first company wasn't VC backed, we bootstrapped it. And I think I didn't really internalize or maybe didn't really believe those things, but they're like, they really are truly, they're accurate. And I think maybe one takeaway is like, look, there is no right way to finance or grow your company just because you like raised VC money doesn't make your company better than if you didn't. The thing you have to be focused on is like, what outcomes you're trying to achieve for the company, for your employees and for you. Amazing. So you've raised so far for pilot at least 160 million. What are some of the most significant challenges or hurdles entrepreneurs face after they secure money? I mean, raising money like it's not the same as success at all. What governs whether your business is successful while it's whether your customers love what you do, what your metrics look like, what growth looks like, what net retention looks like, what margins look like, etc. And having more cash on the balance sheet doesn't change any of that. If anything, it actually raises the stakes on what you now have to accomplish because you have these investors with certain expectations. You've taken on all this money. Now you're committed to deliver the thing you said you were going to. Like yes, it makes stuff easier in that you have dollars to spend. But in many ways, what you have to achieve now has also significantly increased in its scale or level of difficulty as well. you know, it makes some stuff easier and it makes some stuff harder and on balance, like, it's just different. It's not easier or harder. Do you feel at later rounds when you when you have more money in the bank, it becomes harder to manage that money because early on, you know, you have a small seed round, you know where you want to get next, which is proving product market fit, you have a series A round, you want to scale the team and then suddenly you want to grow exponentially, you get a lot of money. Do you see that it becomes harder to get to the next point because you have so much money and you might make more mistakes? I mean, I think every new milestone is much harder, but you also have more resources. And so how does that net out? It net outs on it, it's still difficult. I don't think it gets easier. I don't think it obviously gets harder. It just gets differently hard. Like the techniques that got you here. are not sufficient to get you to the next milestone. And that's one of the things, in some ways that's like really satisfying, but also very frustrating about kind of being the founder, being the CEO, which is you feel like you finally mastered it and now like the difficulty has doubled and your old tricks don't work anymore. In some ways it's like you're constantly being reset. You have to learn to play the new game. Amazing. I like to ask this question on my podcast, which is related to. principles. I have a newsletter called Principles Friday where I share one principle about a founder that could help other people in their life. What is a business principle or even a life principle that you live by that has helped you in your journey? I think really the importance of responsiveness. If a customer emails us or a potential investor emails us or a prospect emails us or someone like, I really like us to be very prompt on getting back to them. And it's not because like fast equals good, but I think it's because it really shows, hey, I respect your time, I appreciate that you kind of have made the investment to get in touch with me and I like want to repay that. And I think people underestimate, I think just sort of how impactful or how important that can be. Amazing. Today, entrepreneurs as they're building their company, they happen to get anxiety because there's so many unknowns, stressful events. You've done it three times. Do you have any advice on how you could control this? This sounds cliche, but you have to remember that you're running a marathon and that's not a sprint. And the consequence of that is, of course you're gonna work super, super hard, but you also have to make sure to take some time to recharge, to invest in yourself so that you can continue to perform at that high level of performance. And so that does mean getting enough sleep. It does mean getting enough exercise, it does mean spending time with your friends and family. Like, it is an important part of the job for you to pay attention to that stuff too. And I think there is a temptation to neglect it. And I think for short periods of time you can, but in the long-term, that catches up with you. And so for me, I think part of like, staying sane while doing it. is that you have to find a way to do it sustainably. And sustainably, I don't, it doesn't mean like you're going to work 30 hours a week and you're just going to like take long vacations or whatever, you're going to work hard. But you are not going to work for literally 100% of your waking hours, you need to spend some of that time on stuff that will actually recharge and replenish. What do you want your legacy to be? Oh, I don't know. I don't really care about legacy, to be honest. I think that like at the end of the day, the thing that you will care the most about is like, did you have meaningful relationships with your friends and family? And so I think it kind of goes back to my previous point, which is make sure you're not neglecting that stuff. Yeah, I meant by legacy, if you want to be remembered for one thing, let's say, what would that be? I don't know, being a nice person, like, you know, treating other people with respect. That's enough. It's very hard to do these days. That's true. If you were to be transported into the shoes of a person for one day, who would you want to be in that shoe and why? Probably not current, but like Jeff Bezos, when Jeff Bezos was still running Amazon, which would be very, very interesting to see how that team operate. I think very universally regarded as an extremely high performance team and culture. And you know, not a perfect one, not one without its faults. But I think it would be very, very interesting to kind of see that on the inside. That would be interesting. One last question. If you were to write a book about your life, what would the title be and why? I don't know. It's interesting because I think one of the, okay, my proposed title is it doesn't matter. And the reason that's my proposed title is there's a very interesting sort of. duality about your startup or just like, you know, anything you do in your life, which is you care about it deeply. It's important. You want to succeed at it. Of course you're a passionate driven person. And I think the thing you have to remember is to actually perform super well, you have to give yourself time to recharge and to give yourself time to recharge, I think requires you to also remember sometimes that while it is super important, it's not as high stakes as you think it is meaning the world will not end tomorrow if you do not write that last email or if you do not sell that next customer. Those things are important, obviously, like you want the company to perform well, you care about your work, but like you have to take the long view about what is going to enable you and the company to be successful. And that is of course working hard and working very intensely, but also remembering that like... there is more to life than this particular thing. And that therefore it's important that you take some time and kind of recharge. We'll see what's next for Pilot and yourself. Well, what's next for me is continue the journey here at Pilot. What's next for us is, you know, we serve about 2000 startups today, doing a bunch of stuff, as you mentioned, bookkeeping, tax prep, fractional sleep at work, and customers really love it. But you know, those 2000 startups that we serve, that's a small fraction of the world, right? And our desire has always been to really do this at the largest scale possible. And we're already the largest accounting firm in the US, the largest startup focused accounting firm in the US, but how do we grow beyond that? How do we make it 4,000, 8,000, 16,000, et cetera? So really just like very slowly and thoughtfully and intelligently putting one foot in front of the other to make the customer experience really good and to deliver that experience to more and more customers. Basim, we wish you the best of luck. It was pleasure having you on the podcast. Thank you for stopping by. Thanks for having me. Amazing. We put everything in the show notes and hopefully our listeners, if you need any CFO level work, tax accounting, is the place to go. Thank you very much. Thanks for having me. Thank you so much for listening to the first 100. We hope it inspired you in your journey. If you're enjoying the podcast, please subscribe to our podcast on Apple iTunes, Stitcher, Google Play or Spotify and share it with a friend starting their entrepreneurship journey. Leave us a five star review. Your support will help spread our podcast to more viewers.