The Biggest Mistake in My 25-Year Journey Building Unicorn Startup | Godard Abel, G2

Intro

00:00I think the most difficult thing for me as entrepreneur is letting people go. The first year funding we scaled to 70 people. [music] Then we had to cut down to 20 and that was over three rounds of layoffs. And I think those are always my worst days as an entrepreneur.

00:10Probably the thing I remember most is even just having to let one person go. [music] First time I had to fire someone. And it's probably made me more prudent as an entrepreneur. But it still felt so hard, you know, to like [music] let someone go, look them in the eye, let them know they're not going to have a job anymore.

00:25I just it felt horrible. And so that was a very painful shift. But then in hindsight, that's also when we learned the most cuz then we just said I just said, "Hey, I just got to focus on the customer, just win the next deal, make the next customer [music] happy.

00:34And if we do that fast enough and we generate enough revenue, we'll be profitable." And we actually then pulled that off where within a year we were able to get profitable. And it really took until 2007, [music] 7 years into the company, till we really found product market fit now.

00:47And it's still hard and challenging, but I think now I feel like I have more perspective. Like one, I'm really choosing to do it. I love building companies. I've realized that. And I love the challenge. And even when we have the lows, and we still have them, you know, you lose a customer, you lose a deal, [music] you lose an employee, it still feels really terrible.

01:01But then I also know that, [music] you know, for every low there's a high. You know, you win a new deal, you recruit somebody amazing, [music] you get to a liquidity event. And and I've kind of realized that the highs don't come without the lows.

01:14People talk about the intellectual side of startups, but I honestly think what makes a great entrepreneur is the emotional fortitude and the ability to continue to [music] persevere through the really tough moments, letting people go, losing deals, losing people, losing customers.

01:27I think when you can persevere through those moments, those are the entrepreneurs that that have success. Hi, I'm Godard Ael, co-founder [music] and CEO of G2, and we're building the trusted place. You go for software. We have about a 100 million software buyers coming to G2 every year to discover the best software for their business.

01:48We have over 3,600 customers [music] and these are software vendors around the world and we have achieved over 100 million in revenue run right now and we did become also unicorn in 2021. So we've raised over $250 million and now we have established ourselves as the leading [music] number one software review site in the world.

The Deep Valley: Seven Years of Pain Before the Breakthrough

02:18Well, I think it goes back to before I was at McKenzie, I studied MIT, you know, so I was an engineer and I remember even when I was at MIT, my best friend at the time, Chris Schutz, he and I [music] thought about starting a company all the way back right out of MIT and we were already working on 3D printing and we're about to start a company, but then we both kind of got scared.

02:34You know, we thought we weren't quite ready. So, I decided to get some real world experience first. You know, I went to work for McKenzie. Chris went to work as an engineer and I first got involved in startups way back in 1998 and that was an exciting time.

02:44I was at Stanford Business School out in the Silicon Valley in Palo Alto. It was the first internet boom. Companies like Google were getting started and I started helping two Stanford computer science students and they were building a company called Alonza and they really just needed a business person to help them.

03:00They were both programmers and I was excited about entrepreneurship so I started helping them and we wound up selling that startup quickly to a bigger startup Niku that went public. I remember in March 2000 I think with a 10 billion dollar valuation and the entrepreneur there Farzad Debbachi he also inspired me he'd worked for Larry Ellison the founder of Oracle and I watched and helped Farzad build his company I thought wow this would be a great time to start my own company and so I started big machines at the beginning of 2000 to really help [music] companies like my father's my father was

03:30in pump manufacturing and helped him the vision for big machines was he made very big pumps and the vision for big machines was to help him sell [music] his pumps online much the way Dell was selling PCs online. And so that was when we, you know, started building our first company all the way back in 2000.

03:47And my first company, Big Machines, as I mentioned, I started this in 2000.com era. I was a 27-year-old cocky kid. I remember one of my first investors was John Scully. You have to be old to remember him, but he's sort of infamous. If you've watched like the movies about Apple, he's the guy that fired Steve Jobs.

04:03He was my first investor. And then once I had him invest, everyone he and his advice to me was just like just think about how you go public in one year. I was like that sounds awesome. But we were also lucky at that time the internet was still brand new.

04:14So the first year we were able to raise $20 million from investors because nobody knew the internet and nobody knew how to sell online. So investors were willing to take a chance on you know kind of young and experienced entrepreneurs. So we got going very quickly.

04:26So the first year was actually exciting. We went from like just the two of us to 70 people and you know raised a bunch of money. So that was, you know, we thought we were going to maybe go public in a year or two, but then it could change dramatically because in 2001 there was then a dot bust and all of a sudden investors that were throwing money into internet companies, they completely stopped and it was the opposite.

04:47And even Amazon was still very young at that time. And I remember Wall Street analysts were saying Amazon was going to go bankrupt and people were saying the internet was a fad. You maybe a little bit like what happened with crypto. First everyone was really excited and then all of a sudden everyone thought, "Oh wow, it's a bad idea."

05:02Yeah. And that was really hard for us because then our customers [music] also manufacturers got very skeptical. They all said, "Oh, we don't really need the internet. You know, we're fine sending cataloges to our customers, [music] CDROMs."

05:11And so it was really got really hard cuz I remember in 2001, I think our business plan [music] was to sign up 20 manufacturers and then we're supposed to sign up 40 in 2002. I think we actually only signed up two that year. Same thing [music] happened in 2002 and by the time we got to 2003, we were almost bankrupt.

05:30you know, we'd burned through 19 of the 20 million we'd raised. So, I think a

Biggest Early Mistake

05:35big lesson learned, one, we started spending it too fast, you know, before we had product market fit. And I tried to hire two VPs of sales before we had product market fit. And we really should have still been doing founderled selling. And so, it really led to a really difficult reset in 2003 because we were down to 1 million.

05:51We also knew we'd never be able to raise more money. We had to go to organic growth. It was really difficult, but we decided to scale the company down from 70 to 20 people. So we had to let a lot of people go and we just said hey we have to get profitable cash flow deposit within a year otherwise we're going out of business.

06:06I think the most difficult thing for me as an entrepreneur is letting people go. The first year funding we scaled to 70 people then we had to cut down to 20 but it always feels really painful and it's probably made me more prudent as an entrepreneur you know since I've had to do that.

06:20Well, one, ideally, give yourself some buffer. You know, raise more capital so you can persevere longer without having to to lay people off and and secondly make sure you get productivity quickly so that everyone you hire ideally is producing ultimately producing revenue.

06:35But it still felt so hard, you know, to like let someone go, look them in the eye, let them know they're not going to have a job anymore. I just it felt [music] horrible. And so that was a very painful shift. But then in hindsight, that's also when we learned the most because then we just said I just said, "Hey, I just got to focus on the customer.

06:50Just win the next deal, make the next customer [music] happy, and if we do that fast enough and we generate enough revenue, we'll be profitable." And we actually then pulled that off where within a year we were able to get profitable. And then it really took until 2007, 7 years into the company till we really found product market fit.

07:04And finally, our success came. We partnered with Salesforce [music] as well as with Oracle for their CRM on demand and we became the leading quoting tool to complement those CRM tools and as they started growing we really started growing. So eventually the company was a big success.

07:19I think 13 years in it was acquired by Oracle for $400 million but it was only after many years of struggle and near failure. And I do love the book by Ben Horowitz the hard thing about hard things. People

What matters more than the intellectual side of a startup is emotional fortitude

07:32talk about the intellectual side of startups, but I honestly think what makes a great entrepreneur is the emotional fortitude and the ability to continue to persevere through the really tough moments. Letting people go, losing deals, losing people, losing customers.

07:46I think when you can persevere through those moments, those are the entrepreneurs that that have success.

Turning Point: Finding PMF Takes Longer Than You Think

07:55True product market fit, you know, where all of a sudden it felt like, wow, people really want to buy this, right? Whereas the first six years it was always just a struggle. I think the first six years we always missed our sales plan and I think for me probably the big difference is all of a sudden like 2007 we started getting inbound demand and part of this was from the Salesforce ecosystem but I remember Salesforce started moving up market.

08:13So I remember one of our first enterprise customers with Salesforce was Rico, you know, the big kind of copier printer company and I remember Salesforce was competing with Seivil, an LCRM product. But I think the customer told them, "Hey, we will only buy Salesforce if you have a CPQ, a configure price quoting app."

08:33And then Salesforce brought us into a deal cuz we already had the technology at Big Machines. And so all of a sudden, we started getting this inbound demand from big companies and they started buying. as you start getting inbound and the deals actually start converting faster than you expect.

08:47But that didn't happen for us, [music] you know, all the way until 2007. You know, my co-founder Chris and I, we didn't want to quit on each other. You know, we were best friends from MIT. We'd also recruited some of our friends. So, I think that was one motivation.

08:58And the other motivation, we did have about a dozen early customers. [music] They were having success using Big Machines online quoting software. they were able to do quotes 80% faster, [music] process orders online in real time. And so we thought eventually the broader market would see it, but we had those classic early adopters.

09:17And then if you followed the Jeffrey Moore crossing the chasm, you were just kind of stuck in the chasm. But we had enough early adopters that were having success. So we also we didn't want to let down our customers and we thought eventually, you know, the market would get to the mainstream and luckily that happened.

09:34Yeah. But it it was hard those years. A lot of days it was very frustrating and I think a lot of days I wanted to quit you cuz I felt like this tremendous burden like I felt like I was failing every day you know for almost 6 years. So it was really hard but then in hindsight I'm really glad we persevered you know because eventually the the demand for the the cloud software did come.

09:52I think number one from my [music] experience don't quit and that's my experience. Usually it takes you longer to get the product market fit than you think. But if you really believe in your vision and you have some early happy customers and I just say don't quit because eventually we've always found the market does come.

10:06[music] And I think most entrepreneurial journeys they take longer. Like I've never been like Mark Zuckerberg, you know, where he coded Facebook and apparently everyone at Harvard used it overnight. And I think that's rare. I know a lot of entrepreneurs for most entrepreneurs it's a longer it takes longer than they think.

10:19And so I think persevering to [music] me is the number one key to having a success as a SAS entrepreneur.

Building G2: If You Truly Believe in Your Idea, Don't Pivot

10:30Once we first got liquidity, it did feel great. Yeah. At first it kind of felt euphoric, but then we also had new investors and honestly then I realized I didn't really love working for them. So I had about a year break and during that time at first I was just tired.

10:41You know, I was burned out after 11 years of struggle. But then I remember a few months into it, my wife also Stacy, she was like, "Hey, what's wrong with you?" You know, cuz I wasn't happy. I'd made some money. Also, my friends didn't understand, but we bought like a bigger house, you know, and my friends that weren't in tech, they're like, "Oh, you should just be happy, right?"

10:59Like, "You've made money. It's a success. You could retire." And I realized actually I missed it. You once I had enough of a break to recover. And I'm like, "Wow, I really miss working with my team. I miss having that challenge every day. I miss building."

11:12And then I kind of with that realization went back, you know, we started G2. We started steel brick and you know we've been building new ventures ever since and it was really the pain we felt when we're building big machines and part of our pain was to get validation you as an entrepreneur it's always hard like why should customers buy from you why should they believe you and at that time you had to rely on analysts like Gartner and I remember it took us 9 years to get a gardener report at big machines you know not till 2009 took us 12 years to become the leader

11:37and so that was very frustrating and Gartner had exclusion criteria you know if you didn't do at least 20 million in enterprise revenue they wouldn't even include you so we thought that was obviously bad for the entrepreneurs. We also thought it was bad for our customers because eventually at big machines we signed up big companies like G Energy for their big turbines, Rolls-Royce for their big turbines.

11:53And some of our customers say to us, "Wow, we wish we'd found you 2 years ago. We've been trying to develop the software in house." So we also saw our customers were suffering. They couldn't discover the latest technology, the best software.

12:06It was too hard for them to find it and it was too hard for us to sell it. And that's why we said, "Wow, if we can create G2, you know, based on real-time peer reviews, make it really easy for software buyers to discover apps, make it really easy for them to buy it."

12:18And that's why we decided, let's make it more like internet consumer shopping. And by the time we started G2, obviously we're all shopping as consumers on Amazon. Anyone in the world can go to Amazon for free, discover products, look at reviews, all of that's free.

12:29And then you can easily buy the product and make it really easy for the best the best technology to win based on happy customer reviews. That would really make our industry better. But we really built it for ourselves. It was kind of scratch our own itch.

12:40We're like after struggling to sell enterprise software for over 10 years, we just thought, well, there must be a better way. And that's what inspired us to start G2. And G2, it's a term for military intelligence. So in the US military, the general's intelligence staff is called the G2.

12:55And in [music] the military, it means give me the G2, give me the quick insight, what's happening in the battlefield. So that was the idea and why we went with uh with the name G2. At first, it is really hard to get reviews. And so what we did, I remember for the first category, we only did one category of software.

13:12We did CRM software because at Big Machines, we've been partners to CRM vendors. So we knew that market. And so I remember what we did to get our first reviews, we put up a booth at Dreamforce, the big Salesforce annual CRM conference, and we were just handing out $5 Starbucks cards, you know, to get people to write a review of Salesforce or whatever CRM they were using.

13:29So it was a very manual effort at the beginning. And then but it took actually a couple years just to get that first category going which actually led us to start steel brick because you know my co-founder Tim he was our product co-founder he kept building G2 and I just said hey this is going too slowly for me.

13:45I went to go build steel brick with our CRO Matt cuz frankly we also couldn't generate any revenue at G2 cuz until we got enough reviews till we had enough software buyer traffic from Google we couldn't generate any revenue. So it was a really hard start but eventually we also learned you know how do we tap into people's intrinsic motivations that they want to share about their software and then I think it's like a network effect business once we had enough reviews in CRM and enough traffic then we started doing products related to CRM you know like email

14:12marketing marketing automation and then once we had a community of users you once they reviewed their CRM app they could also review their email marketing their marketing automation so we kind of started growing in related categories and then we found some people do love to share you know some people do want to share their expertise.

14:26They want to help other people and so eventually we got that flywheel going and now I think we have over 2.7 million software reviews and we've also brought it global. We have a partner in Japan now for example it review.jp. It's a soft bank CNS company but we've even proven now that we can do it in Japan.

14:42Now we have we have great review insights in you know hundreds of categories. It's probably took about 5 years not only to get the reviews but then to get enough traffic buyer traffic and then to really be able to start making money. But I remember to me the turning point was 2017 Excel, you know, very famous Silicon Valley VC firm.

15:01They'd also funded Facebook. But they called us all of a sudden and they said, "Wow, all our portfolio entrepreneurs, all the Excel entrepreneurs in their pitches to the Excel partners, they're starting to use their G2 [music] reviews or G2 ratings."

15:14And first, I didn't believe it. You I was like, Tim, my co-founder, he got the inbound and I'm like, "Oh, the you know, some of these VCs just call everybody." I'm like, "Oh, Tim, they're probably not serious, you You know, but then I had a friend Kevin Efy who was a partner there and I called him.

15:25I'm like, "Hey, are you guys really interested?" And they said, "Yes." And that's kind of when I felt like, "Okay, if the VCs, leading Silicon Valley VCs are starting to see this and obviously they want to put in money and we had enough revenue traction, but at that point all of a sudden it felt like, okay, we have product market fit, this flywheel starting to spin."

15:40But it it took us 5 years, I think, to get there. When Excel invested, we were maybe at 5 million ARR. But then all of a sudden we started doubling every year and I think we grew to you know very quickly then grew to 50 million ARR you know by 2021 and that's when we became a unicorn but then I think like 0 to 5 took a really long time and then [music] 5 to 50 it started to happen really quickly cuz we had that product market fit plus SAS was booming you know there were also so many new SAS products I remember we were creating categories like conversational intelligence and we helped create

16:08unicorns like gong chorus you know so we started seeing the model really work where we could help you know define whole new categories stories like conversational intelligence help buyers discover those new apps and help the vendors win quicker and so then all of a sudden it you became really exciting and fun I think the challenge of every entrepreneur is at the beginning no one's heard of you and nobody's heard of your company nobody knows your brand and so it's really hard just to get a chance to win customers and so I think that's probably number one reason cuz once you

16:37have good reviews on G2 then buyers will discover you on G2.com so it can be a very efficient way to generate leads and I think the second big reason is every entrepreneur needs valid ation and that was like my inspiration cuz [music] you know nobody wants to wait 9 years to get in the gardener report.

16:50Now I think we have created this trust badge you know that entrepreneurs are proud of. So it's also a quick way to validate that their customers love them that they have a great product and what's interesting now we also have VC customers you know we have about 60 investors that use G2 data to also figure out which companies they're going to invest in.

17:05And so for entrepreneur now it's doubly valuable because once you get those badges once you're doing well in G21 you get more buyers more customers. That's the most important thing. But frankly also investors notice they look at the trends in our data and all of a sudden they also start getting calls from VCs and so I think for that reason and I've always been that software entrepreneur you know we built big machines we built super kind of we kind of built it for ourselves we know what they needed and it's wonderful now to see it working and really an entrepreneur anyone in the

17:30world can start and and once they get that validation on G2 it helps them you know prove that they have a great product and it helps them grow faster and that makes me really happy you I consider software entrepreneurs kind of my my brothers around the world and uh we love helping them, you know, validate their success and then grow faster.

Advice for Founders Going Through Their Hardest Moment

17:48I think the first one's the hardest and maybe it's also like parenting, you know, if you have kids, I think the first kid's always the hardest cuz you don't know what to expect and it's still hard and challenging, but I think we have now now I feel like I have more perspective.

17:58Like one, I'm really choosing to do it. I love building companies. I realize that and I love the challenge and even when we have the lows, and we still have them, you know, you lose a customer, you lose a deal, you lose an employee, it still feels really terrible.

18:09But then I also know that for every low there's a high. You [music] win a new deal, you recruit somebody amazing, you get to a liquidity event and and I've kind of realized that the highs don't come without the lows. When I'm not doing it, I miss it.

18:21So I think that's why we're, you know, we're still building companies now, you know, 25 years into it. You really have to believe in your own vision and really believe that what you're building is going to make the world better. And I do think also in B2B SAS, it really has to be an idea that where you have founder market fit, where you really believe and it's a pain you felt.

18:37And I was like with G2, right? We felt the pain so severely because it took us so long to build big machines, so long to create product market fit where we wanted a solution like G2 to make it easy for [music] our customers to discover us, make it easier to grow our business.

18:49And so I think really believing in your idea, really believing in your vision. I think is what allows you not to pivot too quickly. I think most SAS entrepreneurs, you know, probably at a minimum typically is 2 to 3 years to get to real product market fit.

19:01So you also just have to have that mindset like, hey, it's going [music] to take a long time and your pivots are probably smaller. you I mean you're optimizing within the product within your vision versus completely scrapping your vision [music] say the right time to pivot and honestly most of my companies we've stuck to the founding vision and most of the optimization there's a thousand details [music] to bring that vision to life like at G2 we did thousands of optimization to improve review conversion but we never shied away from the idea that reviews were going to be critical to help

19:32software buyers and sellers connect better yeah I guess to me it's if you really believe in your vision And I would never [music] pivot.