SaaS Growth Strategies That Actually Work: Pricing, Localization & Survival

0:00Hello. It's wonderful to be in such a delightful location. Thank you so much, Rob, Fraser, Sonia. You put on a fantastic event. It's been good to meet some of the community here already. I know I'm amongst my people here. I'm a former founder. I'll tell some embarrassing stories about that some way through this. But also, of the first four conversations I had as I walked in, three of them were Paddle customers, so that's a good sign. So, it's good to be

0:22with you today. Um as Rob said, my name is Andrew. I joined Paddle as CMO 3 years ago. But my background was, like many of you and like we heard from Peldi just now, was as a founder, gritting it out. We were bootstrapped for 3 years and then venture backed for 9 years before we sold in 2019. Um and my favorite definition of success is Winston Churchill's one, which is a successful person stumbles from one failure to the next with no loss of

0:50enthusiasm. And that's certainly something that's held true for me since I ever started before we founded that business that was successful and sold, returned capital to all its investors, and set us up for the future. I started multiple businesses that died on their ass uh 1 month, a week, a minute after we, you know, found the domain name, found the logo, tried

1:13to work out who to sell to. Um at Paddle now, some of you might know what we do. We process about $1.2 billion of of payments for many people in this room, for about 4,000 customers around the globe. So, it's a replacement for Stripe. We deal with lots of other payment gateways, too, to optimize that and also deal with all the sales tax

1:32compliance. We help people go global. Which is really interesting. Because I remember my first foray into internationalization. And today I'm going to talk a little bit about the failure modes of growth and how we can avoid the failure modes of growth. And I've got a lot of stories of failure, so we'll kick off with one of those cuz as I was thinking about this just now, I realized that although we help thousands of businesses internationalize, sell compliantly and efficiently all around the world from wherever they are coding, wherever they

1:59are building their companies. My first foray into selling into new market was horrific. I still can feel the the emotion in me as I start talking about it. My first business was a a top-end women's wear fashion label. So, first term of university, rocked up, wanted to start a business, found a found a friend, said we're going to start something. And our thesis for that business was, "What do we think is the hardest industry to break into? Let's start there." That was the entire thesis. Let's start there cuz everything in our careers afterwards will be

2:29easier. And so, we started this business. We It was kind of crowdsourcing before that was a thing. This was back in 2005, 2006. So, we solicited input from the top fashion designers across the UK, from the top fashion colleges. And we said, "Look, we'll pay for them to be sampled, build a collection, sell it into trade, into boutiques, and we'll give you a commission on everything we sell, a royalty on every one of your products that gets sold." And we did this and I went on into exchange uh onto an American university, so did my co-founder. And we thought it'd be a bright idea for our first season's

3:05collection of top-end women's wear. Now, I've never dressed any better than this. I've got no idea about the industry. "Why don't we book up back-to-back meetings with the top independent boutiques in New York, in Manhattan, and try our luck?" And I can remember receiving this shipment, this FedEx box. We hadn't even seen the clothes. And the next day we were going in to pitch all of these boutique owners. And I remember opening it and just falling on the ground and and like "It's all crap. It

3:31looks crap." My wife attests it. The second season was better, but up we went down to We were in Philadelphia, got on the bus. It was not too far after 9/11, so there was lots of security guards and then there was this big, burly security guard at the bus. And he asked [snorts] us all to open our suitcases. So, in front of everybody, we had to open this suitcase with all the pink tissue paper, with all these women's clothes that he

3:55had to go through in front of everybody. So, it wasn't a good start to the day. Then we got on the bus, got into Manhattan. And we got a firm and unequivocal no from every single person we talked to. And I can remember sitting on the curb overlooking the Hudson River afterwards thinking, "What on earth are we doing?" Totally outside our comfort zone. Zero founder market fit. Zero product market fit. Loads of ambition. Loads of enthusiasm, but not much else. Um that business ended up in court in the second year of university. You can ask me about

4:27that over drinks later if you want to. But we just didn't learn any of we didn't know any of those basics that so many of us get to learn now. We stand on the shoulders of giants. A great talk by Peldi just now. So many tools, so many frameworks that we can build on top of. So, it's slightly ironic that we help all of these businesses go global now, given that poor background. So, today I'm going to dive into a a little bit of our data to try and highlight a few things. Three that are big and three that are small. Cuz the best founders I

4:56know are people who are able to think big and small at the same time. To be able to think short-term and urgent, as well as long-term and visionary. They're able to think and act fast, as well as be calm and not get too frantic. And not act in a hurry. And so, I'm going to take three big, amorphous things and three little technical things, and hopefully they'll be helpful to you. When we talk about data, um we we sit on top of a huge amount of data. Um you know, at Paddle, yes, we process, you know, over a billion dollars for people. But we also have a metrics product. I know Patrick

5:30Campbell came and spoke in the US MicroConf. Um we acquired his company, ProfitWell, a couple of years back. And we see 36 billion of ARR through that free metrics product. And I know know there's a bunch of people here today who use ProfitWell metrics. It's due an upgrade. It's coming. Um 19,000 companies use this. And when we look at

5:47the macro here, it's pretty interesting. You can see the macroeconomics flow through the data. You can see the SaaS boom. You can see growth slowing. Now, fortunately, most people in this room weren't affected by the weekend of the Silicon Valley Bank collapse. But I remember that. We had about $20 million in cash in their bank account. And for that weekend, we had no idea if it disappeared or if it was still there or if it was going to be a lockup for a while. Um and then we've gone through this period of growth stabiliz- stabilization. Now, even if you don't raise money,

6:16this macro makes a big difference. And what you can see here is the interest rates, so that's the little blue line. And what you can see is the growth rates. The way interest rates drop, growth rates across the wider corpus boom. People have capital. They're able to spend. Um and the inverse happens as well. And there's about a 2-month lag on that. And so, what we're seeing in the market right now is a much more slow but steady growth process. So, the red you can see the first half of this year's compound annual growth rate imposed against 2 years ago, 2022's compound annual growth rate. So, there's good things and

6:51there's bad things. The good things are that it's more stable. The bad things are that it's a slower average growth rate than it was 2 years ago. But no one here is wanting to build a business that's average. And averages can be really misleading. And the the detail comes when you click a few, you know, points deeper than this. And we publish a report every single month diving into this to try and bring some insight out of it. Because I found out recently that the average age of a diaper wearer in the US, stay with

7:18me, is 22. Right? So, lots of babies and a few elderly people. But the average is completely meaningless. And that's really true about a lot of this data, too. You got to start thinking about your segment. You got to start thinking about your price point, who you're competing with before you just look at

7:33this compound annual growth rate of 11%. Cuz in this room, there are a bunch of people who are killing it. And your problem that you come to this conference with is, "How do I make this decision versus that decision? How do I manage this growth? How do I manage this hiring?" And some people are here and you've got the opposite problem. "How do I stimulate some growth? How do I not run out of cash before I find that product market fit?" So, in the room we see both of those extremes. So, let's try and dive into three things that are big, fluffy, and scary, often at the early stages, and then three

8:02things that are super technical and deep. One of the privileges of my role um at Paddle is that I just get to chill with founders all day long. And I do that in a, you know, Paddle capacity with our customers and with prospects, but also just in as advisor. I'm allowed to do that as part of our our kind of contribution. We want to help the SaaS industry. So, all our execs, most of us are former founders, we spend loads of time just working with founders on their growth. And I was with a head of marketing and a founder recently. And they'd brought me They were under a

8:33million of of ARR. And they brought me this beautifully designed dashboard. Honestly, it was better than what we have at Paddle to describe our growth motions. It was beautiful. 28 different columns of how they're generating leads. It was data-driven to the extreme. And yet, they came to have the conversation cuz 27 of those 28 had a zero against them in terms of leads generated, demand

8:54generated. They were being extremely data-driven. But when I started asking questions about their company thesis, they had a data-driven approach before they even knew their company thesis. Now, I've already told you, my first business had an appalling company thesis. Start where it's really, really hard and see what happens. But the first thing that feels big and scary when you're starting out is to really dive into what is your thesis for your business? What is the thesis of how uh of of what value you provide? Why

9:22people should care? How do they decide? Who influences them? Talking through these qual questions before you dive into the quant are super important. Because we can all measure stuff. But if we don't know what we're trying to achieve, why we have a right to exist, then those measurements are useless. And the failure mode I've seen a few times recently is people who want to be data-driven before they can answer these

9:44harder questions. Second big, scary topic. Sounds like a truism. Create a tight target market. Make sure you can know them. I can remember when I first learned this. Like running into a brick wall and getting a headache. It was so real. We were my my my company was a company called Idio. We were a

10:07personalization business. We had 40 members of staff at that point. We'd raised a small amount of money. And we looked at our customers. And we found that we could group our customers into 15 separate market segments, different verticals, different sizes, trying to achieve different things. We were horrifically spread. 40 members of staff, one kind of product, trying to serve 15 different

10:30types of users. And we went away as a leadership team. We were flatlining on our growth, lots of churn. Went away as a leadership team and we went through Geoffrey Moore's Crossing the Chasm. Many of you might have read that old school book market entry. Um talks about focus and finding that beachhead. It's a bit of an overly military metaphor. The beachhead that you land on and then the country and

10:49then the continent. But he really advises you to make sure that your beachhead is so small, your target market is so small that you could genuinely win 50% of it in the next 18 months. So your list of target customers is so small that with your current resources and go-to-market, you can dominate that

11:07over the next cycle. So we challenged ourselves to do this. We didn't really have anything to lose. Our cash was running out. Our board, and yes, we had one belly unfortunately, was frustrated with us. And we made the the do or die decision to let go of 14 of these 15 different target users. We focused the entire on upmarket enterprise B2B tech. That was where we thought that was best fit. Well, actually, there wasn't best product market fit. We had one customer in that segment. But we knew there was a willingness to pay. There were deep pockets. There was a good market. So we thought let's bet the company

11:39not where we've got best product market fit, but on the the the the segment of the market that we can really own and build a proper sized company over. And after that decision, we lost people who we'd hired because of wanting to sell into financial services or other verticals. We lost customers. But it started this 18-month growth journey of selling into Salesforce and IBM and Intel and SAP and Cisco. And one by one, we knocked these big customers that all looked pretty similar down. And

12:07that led to our exit. We all think we've got this tight target market. But one of the challenges I walk through with the founders we serve is really is that market big enough to matter, but small enough to genuinely go and win and small enough to deeply understand. Are you able to build real customer intimacy? I love the the old Ogilvy quote, don't count the people you reach,

12:31but reach the people who count. The challenge here is to make sure that even if we're a horizontal software play, and many in this room might be, that you adopt a vertical go-to-market. We do a bunch of research with Kyle Poyar and the team at OpenView. And one of the things we found in the last year's benchmarks SAS benchmarks report was that vertical software was correlated with outlying growth and

12:53horizontal software wasn't. But what we are finding is the horizontal software companies are now increasingly adopting a vertical go-to-market. So even if your software company sells to everybody, you discipline yourselves to find a process of working the the GTM, the go-to-market, to a very very targeted customer base so that you can learn and so that you can build and you can build

13:16that customer intimacy. So, we started off by talking about the thesis. Secondly, we then talked about this tight target market. And really, those two are the underpinnings of this story that you as a company build. Horwitz says that your company's story is your company strategy. And in most of the businesses I've had the privilege of diving into their demand gen funnels and working out what's working or not, it's the story, the message that's the least optimized piece of the demand engine, which I find super fascinating. Everyone wants to tweak their tactics and channels, but if you don't have a story to tell that's meaningful and people want to listen to

13:51and you actually don't have a target customer for which that story resonates, then all of that optimization around tools and tactics doesn't work. Doesn't sound very data-driven, but it's what we see constantly. And then, one thing that I didn't learn early on and had to relearn and relearn again is that your company story is best told by

14:11other people, not yourself. And so the challenge you have is not just to boil this down into a way that you can explain it, but for that to be viral, that be able to be passed on from person to person. If you're selling into teams, can you hand on heart believe that the first first person you sell into is going to repeat in a meaningful way your proposition, your right to exist to their teams without it losing significant amounts of fidelity? And that's a whole different topic. We can dive into narrative and how you build a great strategic narrative for your business. We can chat about that all

14:43afternoon on the boat trip if you want. But this story has to be articulated in something simple enough that it can be told by other people. Back at Idio, it was analysts. We were selling into Salesforce and IBM. So I had to do the old trudging walk of Forrester and Gartner and IDC. And you know, what I learned there is it's not about the money you pay them, which can sometimes be excruciating, but it's about the relationships you build. Do they genuinely know what you do so they can build it as part of their

15:11market story? Now at Paddle, it's about working with our best customers and making sure they can articulate our story, our value to the market in a way that's meaningful. It's working with influencers in the space, creators in the space that can help tell our story in a way that has high fidelity and continue to be told

15:28and told and told into the market. So one of the things that I find founders work on hard is their own storytelling and what they work on less is whether that story can be carried beyond their halls. So it's not just them screaming into the void. I've already met a couple of people here who are building influencer platforms or are working with influencers. It's one of the hot topics right now. But I do believe if you can't build true relationships, and I don't think, you know, you can ever go on a platform and pay $1,000 per LinkedIn post and see results immediately. I believe a lot of that comes from

16:00relationships. Do they know why your company exists? Do they know how you solve the market problem? So, your story has got to be told by other people, not by yourself. Three big amorphous hand-wavy things to start off with. So let's now dive into three much more tactical, small, detailed, and complicated jobs. One of the bits of advice that was a failure mode for us back at Idio was this phrase that you shouldn't sweat the

16:27small stuff. Our VCs told that us every now and again, don't sweat the small stuff. And yet I know from some of the conversations I've had here today that there's a lot of people here who love sweating the small stuff. Or even if you don't love it, you know it's vital for building a business. And it was a massive miss for us because for many years, we were going through this process of trying to push for this north star that our VC investor had laid out in front of us that we'd

16:51agreed to. And we weren't sweating the small stuff. We weren't trying to find the wins all across the business. In that great book Hard Thing About Hard Things, they talk about silver bullet syndrome. How there's never a silver bullet that solves growth for your business. Actually, it's thousands of things. Thousands of tweaks you make across the business that actually builds that

17:11efficient go-to-market motion. So it'd be remiss of me to not dive into pricing and packaging. It's one of the first ones of these. As a founder, this scared the life out of me. Changing our price. How do we come up with that price? I can remember emailing Patrick and the guys at ProfitWell 10 years ago trying to say, what the hell do we do? Got no idea how to price what we're doing for a new segment. Give us some advice. And there's now loads of great advice out

17:39there. But if we just think about this from the broad principles and you know, we've got loads of content on it. Other people got loads of content on this. It comes down to a few key things. Firstly, do you understand your value metric? Your value metric is your your unit of exchange. Your currency of exchange. Is it seats

17:56or kilobytes or you know, resolutions? Think hard about your value metric. Don't just copy what the competitor does because they might be wrong. Good value metrics, and we see in our data that charging on a value metric based on per feature always outperforms. We've got lots of data on that that we've published. They have three key attributes. Firstly, a good value metric is correlated with

18:19growth. As the customer grows, they're willing to pay more and they're able to pay more. So price goes up as the customer grows. Secondly, value. As value received goes up, the price goes up. Again, might sound obvious, but I bet a whole whole bunch of us have had pricing models where that doesn't where you don't capture value as the value goes

18:38up. And then thirdly, simplicity. Does the customer understand it? One of the couple of you referenced it to me last night. One of the series we publish on Paddle Studios is pricing page teardown. Where a whole bunch of our pricing team look at pricing pages and rip them apart. And often it comes down to is there a value metric here? Or now in the market, increasingly we are seeing multiple value metrics to enable you to monetize more effectively. Again, we can dive into the detail of this, but finding your good value metric. But the principle that

19:08underlies this is actually much simpler. Build a pricing muscle. It's great to hear that a quarter of people in this room are already over the 100K MRR mark. And that's probably the point at which this really makes a meaningful difference because you've got some existing customers as well as you rapidly acquiring new ones. But what this graph shows on the yellow, the top line, is companies cohort of companies that have

19:31updated their price every quarter. And the bottom line is companies that haven't made made a price change in 3 years. Who's made a price change in 2024? There we go. Fantastic. I love it. People sweating the small stuff. This stuff is hard. You don't want to piss people off. You don't want to get it wrong. You don't want to have lots of

19:50people angry at you for lots of reasons. 103% increase average revenue per user or average revenue per account from merely changing tweaking your pricing structure once every 3 months. It doesn't even mean it was a good pricing change. A well-executed pricing change. It just means you're building that test and learn muscle in your go-to-market where you want to make changes. You want to experiment. I find this fascinating and yet so many of us don't do this. The first thing you have to do is really simple. Just book one meeting in your diary every quarter with a couple of the key people. Maybe your head of product

20:23or your head of revenue and challenge yourself to think about one price change you can do. If we talk about this in in in more depth, actually the market's got really high expectations now and lots of the pricing advice of yesteryear was just raise your prices cuz we were all undercharging, particularly bootstrappers, right? We were undercharging and there was room to inflate prices. Actually, all of our

20:43data says right now that isn't the case. Blunt price rises aren't working much now cuz there's a very high inflationary market and there's huge competition. We're all competing with an increasing number of vendors and so blunt price rises going from 9.99 to 12.99 on your base plan aren't working. But, what is working is much more subtle

21:02monetization. So, what we've got here is a a graph, one of the graphs we pull many many times for our clients. On the vertical axis, we've got the willingness to pay of the customer. On the horizontal axis, we've got the preference of any one of these dots which are features within our wider product value proposition. And so, we've seen this kind of devaluing effect where people are less willing to pay. But, actually if you go beyond just thinking about a a blunt price rise, you can monetize more effectively cuz what you'll find, and you can do these kind of surveys just through a little survey form through

21:34your customers or through some prospects. It doesn't have to be expensive. You can start understanding which features are broad value drivers. They've got high willingness to pay and they're most preferred. Most of your customers prefer them. So, for us, it's sales tax compliance. There's lots of things we offer but we know that a huge portion of our customers choose us cuz they want to absolve themselves of sales tax issues all around the world. It's a value driver for our core plan. But, over in this corner, you've got these niche value drivers that are super interesting that have got a very high willingness to pay but maybe 20-30% of

22:06your customers want to pay for them. Now, this is where there's gold because you can start charging add-ons. Cuz you're now aligning willingness to pay with a price point for the put the for the peak the piece the portion of your product set that you can. And I I remember my first lesson of this. We were selling into it before we made the decision I meant earlier meant mentioned earlier. We were selling into um global asset managers. So, the JP

22:27Morgans and the Morgan Stanleys. And we were stuck in procurement for 6 months. And we didn't know why this thing wasn't getting signed. Everyone had agreed to it. And it was a license fee 80 grand a year or something for the fee. It wasn't too expensive for them. And then we suddenly realized that their procurement team did not believe that we

22:45would deploy what we had sold them. And so, we went away and we added a $20,000 implementation fee. 2 days later, the whole thing gets signed cuz they had a very high willingness to pay for a very niche portion of our value prop that actually we'd never charged anyone for before and we didn't do anything different for them. The same customer success reps turned up. The same solution architect

23:07turned up. The same deployment time. But, they had a need in their business to make sure that that box was ticked. So, that's just a little example. There's lots of others whether it's enterprise single sign-on, etc., etc. Find those niche value drivers cuz that is how you can improve your monetization in today's market without a broad list

23:23price increase. Cool. Second detailed growth strategy. I mentioned and I showed that overall macro chart. But, what's fascinating about this is the different growth rates in different regions. The Oxford English Dictionary last year added the word permacrisis to its lexicon. Horrible word, permacrisis. There's just fear of wars, rumors of wars, stuff going on, interest rate changes. Yeah, it's all across the world. We actually see different environments. And everyone in this room,

23:55we're now born global. We have the opportunity of selling into every market around the world from day one and we've got the threat of competitors starting from every city and village around the world and competing with us. And so, you know, the businesses we serve find a a real advantage by selling into different regions in different ways. Here and all these slides can come out later, but this is last year we ran a cohort uh and you can see different growth SaaS

24:20growth by region. US is still a huge market, obviously. But, in you know, comparative terms on its growth rate, it's not growing as large as fast as ANZ, Western Europe, Southern Europe. And we can go beyond that and think about willingness to pay. Are you charging different amounts in each of those regions? You can just grab some simple data on the Big Mac Index. How much are people

24:42paying for the Big Mac around the world? It's different amounts. You can see here the Nordics, Western Europe are more willing to pay than Southeast Asia. So, we're leaving money on the table if we're not localizing. So, it goes beyond translation. It goes beyond some local form of support and service to actually how you're monetizing differently in each of these ways. And we love pulling this data. I love seeing this data of when you add local payment methods, when you add localized currencies, when you localize your pricing for willingness to pay, how that thing compounds. And once you get into the hundreds of thousands of monthly revenue, this makes a

25:12meaningful difference. Our product team just last week run ran a study across all of our customers, the 4,000 customers on Paddle, and found that if you had more than one payment method on your checkout, it was converting at a 23% higher rate. Cuz now every region, you know, iDEAL in Netherlands, you've got Alipay over in the East, you've got lots of different methods that people want to pay via. So, these things are the sweat you're sweating the small details. You're finding those little bits of edge over

25:39other people. Right. Finally, let's end on a low point a high point a low point. Um I hate this phrase, startups die from suicide not homicide, but it is so so true. And one of the scariest failure modes that I've seen over the last um 6 months, and it's scary because it's so avoidable, is people building a model for their

26:00business that kills them. Now, I love being in this room where, you know, patience, calm, thinking for the long term are words that you're all using. Relationships, trust that often aren't the first words in the VCs' lexicon. I'm loving building a bootstrap business on the side right now and being able to do that in a completely different mode to what is currently my day job at Paddle where we've raised, I don't know, 300 million dollars and we've got the associated pressure that goes alongside

26:28that. But, even whether you've raised or not, are you really aligning your growth plans with what the market can really support right now? There's an there's a latent amount of demand for what you've what what you've built. And too many eager, particularly first-time eager, particularly venture-backed or seed-backed entrepreneurs are so desperate for that growth that it's the growth that kills them. I love the fact that there's an increasing narrative in the market about

26:54building calm businesses. One of the things, and I don't know how much we publish these talks, I'd be careful what I say here. One of the things that we did at Paddle this year, which was such a blessing to us, is we held firm on a really cautious growth rate. And it meant that actually we're beating that. And so, everyone feels like they're winning. And our investments were in line with that really cautious growth rate. So, we know our path to break even that's very quick over the next matter of months. And we know how we can put ourselves back in control and not constantly be at the whim of the

27:25backers in the market. It was a massive example for me of how to do that at a much larger scale. But, whether you've got hundreds of employees or you're the sole founder, make sure that you put your aspirations down on paper in a way that you can actually go and achieve and that don't

27:41kill you. One of the things I learned from bitter experience through that idiot growth journey where multiple times we were going back into our pocket and putting money into the bank account to make sure people's salaries were paid for, where we had bitter experience of key staff members stealing from us, where we had constant fundraisers that went wrong, we had to borrow and beg and buy from here

28:01and here and here. Is you've got to survive long enough to succeed. I love that final exhortation. Don't die. Make sure you're building a business that A is able to survive long enough to succeed because in this market, in this permacrisis, there were all kinds of headwinds, all kinds of tailwinds. And you've just got to find your find your groove, find your way through that and make sure you're positioned to receive those tailwinds where they

28:25come in the market. We've run out of time, but I'm more than happy to dive into questions. I'm also very happy to chat over over lunch. I love getting into the detail of this. And what I've tried to do is just give three big and scary topics and three super detailed topics. Um feel free to grab me on on LinkedIn if you want to dive into any of that in in more depth as well because it's such a privilege um to be serving thousands of entrepreneurs around the world who are trying to make their own dent in the universe and I'd love to find out more about yours and

28:51how we can help. Thank you. [applause]