How Engagedly Reached $7.6M ARR Through Disciplined Hiring and Bootstrapped Growth (Interview with CEO Sri Chellappa)

Event Context and Introduction

Nathan Latka

00:00Quick context. This was recorded March twenty eighth and twenty ninth. So a couple weeks ago at my live event, saasopen.com. We had a thousand software CEOs there. If you missed it, we hope to see at the next one, September fifth and sixth in New York City, saasopen.com. But for now, let's jump into the recording.

Audience Poll on Hiring and Firing

Sri Chellappa

00:21>> Let me just go over I'm gonna try to try to talk a little bit more interesting topics than just that. But how many of you are right now trying to hire your next executive right now? Like your VP or anybody like that? You are okay. And how many have had tried to or had to fire or let go on other underperformers in the last few. Okay. Great. So we'll talk a little bit about that as well

Talk Overview and Agenda

Sri Chellappa

00:44>> in this. So essentially for the next twenty minutes, we're gonna first talk about what kind of hires you really need at 1,000,000 because they are your ultimate fulcrum for you to get to the next five to 10,000,000. So the first key hires are extremely important. So we'll talk about that. We'll talk about how we we need to hire for hunger and things like that. Then from three to five, the hires typically change the type of hires

01:07>> you want and what does that look like. And then hiring for scale which is where I am right now. So I'll talk a little bit about where we are. So there's some I'll be a little bit transparent about where we are as well in the process.

Engagedly Growth Journey: 2016 to 2024

Sri Chellappa

01:18>> So our growth, this is our chart. These are real numbers. So we were we started in end of twenty fifteen. 2016 is when we launched. We were like, I don't know, 20,000 in revenue or something like that in 2016. 2017, 2018 we started growing. We didn't really hire. I was doing all the sales. I was doing marketing. I was doing implementation of the product. I was doing a lot of those things until we got to about

01:41>> 1,500,000 or thereabout in revenue. That's when we hired our first CSM to help implement so that I could focus a little bit of my time in in sales and marketing and things like that. We also hired our first AE, which is our salesperson who didn't have prior sales experience. 2019 actually this AE should have been here. Anyway, the 2019 is when we first hire our AE. First VP in 2020 is when you first hire VP and

02:09>> I'll tell you about some of the mistakes we did in the in the process and you hired a second VP. The first VP or the VP of sales, second VP or the VP of marketing. Typically what you hear is that you should hire your head of marketing first before you hire your VP of sales second. But I did the opposite here. And then since then we really haven't hired any new executives if you will. So we

Current ARR and Acquisition Update

Sri Chellappa

02:29>> we are here right now roughly 7.5, 7,600,000 ARR. We'll hope to finish the year a little over eight. And part of this was also an acquisition we did last year as well. So let's start with section one. The first hire of your 1,000,000 at the Fulcrum, you hire for hunger and that's one of the things that I'll talk about and the lessons I learned from my first hires. The typical hiring times, engineers typically will take anywhere

Hiring Timelines by Role

Sri Chellappa

02:56>> from month to month and a half depending on what type of engineers you're looking for. If you're really looking for some high end AI engineers, it might be longer. Marketers are fairly easy to find, but the good ones are really hard to find. So that's a big lesson I learned about marketing. Sales execs depending on the market conditions, know, last few months and last year has been extremely good from a hiring perspective because a lot of

03:18>> companies are laying off and letting go of people and there's a lot of uncertainty that we saw in last year. So we were we were pretty we were in a good state to hire AEs. But if you're in a hot market, it's really hard to find the good ones in a reasonable amount of time. Finding a good VP of sales and marketing are really the hard ones which can take anywhere from eighty to ninety days, sometimes

03:38>> even longer and it's worth waiting for it because this is not something you wanna change every few months. So hiring for this is a data I looked at one of the

Hiring for Attitude and Aptitude

Sri Chellappa

03:48>> research studies on why people don't succeed in their roles. And that's why I talk about hiring for attitude because technology changes, environment changes, you can teach new skills especially if there's a hunger for learn learning with the person you are trying to hire. But what I saw here is that

04:10>> forty six percent of the time people fail in eighteen months in any hire you do. 19% of the time they're not a long term success.

04:23>> Actually, only 19% of the time are they a long term success in your role. So essentially at some point they fall out of the role that they were hired for or the role that you want them to get into. 90% of the time if they lose their job, whether they lose it voluntarily or you let them go, is because of some attitude related issue. Either personality or because they have an attitude issue or they can't work

04:46>> within the team or there's a culture fit issue or they're unwilling to learn and grow, things of this nature. It's only 10% of the time there's a skill gap issue. So nine out of 10 times you're letting a person go not because there's a skill gap, it's because it's one of these other aspects here. So that's an important thing to hire. So what that means is hiring for attitude. So I use this two a model, attitude

05:08>> and aptitude. So I look for attitude and aptitude. Aptitude tells me what is the potential to learn and grow. Attitude tells me whether they have what they need from a mindset perspective to do that.

05:22>> This is another graph I found from one of the investors. Graham Weaver is a famous investor in Silicon Valley, if you've heard of him. And the candidate performance over time, I'll take a minute to look at this. So this is the black line is high attribute, less experienced candidate. So attributes are those attitude related variables I was talking about. The blue line is low attribute, but more experienced candidates. That that they are so they're shorter on

05:53>> some of this attitude thinking. Are they a go getter? Are they a growth mindset? Are they a team player? You know, are they flexible and adaptable and things of this nature, but have more experience. But you look at their performance over time. When they're coming in, the performance is gonna lag. But over time, their performance is gonna exceed the other individuals. So this is extremely and I don't know how to ex exactly measure for aptitude. There

06:14>> are and attitude. Aptitude is easy. There are a of tests for that. Attitude, there there are a lot of personality tests you can give. But I've never found anything that's so reliable that I can say this is the way I would render some assessment to understand that. Because it really comes down to your own cultural values as well as an organization. A startup might need a separate set of attitude versus an established company like an Oracle

06:34>> or Google.

Lessons from Early Hires

Sri Chellappa

06:37>> So lessons learned of from a first hires. It's better to be understaffed than hire too fast. I've made this mistake multiple times and I still find myself making these mistakes sometimes because you really get excited about some of the growth you could see or some of the gaps you might have in your team or the skill set gaps. And you find a great candidate, you meet them at a conference like this, and you wanna hire that

06:57>> person. It's better to be understaffed than to hire too fast. The hiring for hunger, we talked about that already. You know, one of the things I've learned is that hiring for logos really means, you know, diddly squat to be honest. I've hired people from Salesforce, Zendesk. I've hired people from big brand companies and I've seen no difference in performance from somebody who might have just worked for a smaller startup or run their own mom and pop

07:21>> business in the past. I've noticed this is a very golden rule of thumb. In six to eight weeks, you know the person's gonna work hard on that. Every single time. Every single time I've had to let a person go. Even a year later, I knew within six to eight weeks that person wasn't going work. If you have any doubt, when I say any doubt, I don't mean like there will always be some doubts, but some conviction

07:41>> related doubt that this person is not going to work out. There's some problem going on here. You typically know that within six to eight weeks. And at that point, it's time time to make a decision. It's rather easier

07:55>> sorry. I accidentally answered my phone call. So

08:01>> in six to eight weeks, you should you should you you would know. And at that point, I think it's you should let them go. It's better to let that person go quickly rather than let them hang around for a while. Sorry. One second. I'm gonna have to turn my phone off or something.

Timing of Leadership Hires by Stage

Sri Chellappa

08:26>> Alright. I put on airplane mode. I should've done that earlier. Anyway, so that's that's an important lesson. I still sometimes catch myself because you you you know, you always have to self doubt if you are sure because it's it's too early. I haven't really figured it out, but you kinda know. If you've done enough this enough times, you'll know. So acknowledge your early hire gaps and mistakes, which is one of the things is you you can

08:49>> everybody makes mistakes. I've made mistakes and I still continue to make mistakes. But the thing is to not make them twice. And that's the most important thing in in in hiring and and keeping people and growing them. Timing and time to hire your leadership hires matters. And we'll talk about some of the mistakes I made. So this is between now if you're a startup founder starting from ground zero, this is basically what the curve looks like

09:14>> at how much you are doing versus how much your team is doing. So in year one, this dark green line is you. So I was doing most of the work, at least for my section of the and I had a co founder who was doing technology work, so I'm not talking about that. In terms of I was running sales, marketing, finance, customer success, and what else? I think that was primarily it. And so I was doing

09:37>> basically that's like four departments. But it's it's a department of one. Right? So I'm doing all that. I'm creating brochures. I'm also helping them answer support tickets. I had a I had a straight line phone number to my cell phone from my customers who could call me and ask me about, hey, with this, I can't log in. Can you help me out? Okay. I can get on the phone. I'll help you log in. Stuff like that.

09:55>> So that's you in the first year, second year, hopefully you'll get some good people like some sales people, maybe somebody to run your demand gen, somebody to do your creators for your marketing team so on and so forth. But here's the most important thing. Your first hires can break your skills. Think about your one hire can take you from here to here and this is valuable time you can use for building and working on your company

10:21>> versus working in the company. But a wrong hire will set you back a year. So if you hire the wrong person, you'll end up doing their job and then you'll have to get back here and then you'll have to find the next person and then you'll be gun shy about hiring the next person quick enough so you'll spend a full year trying to figure out who to hire to to do that. So this another one, hiring.

10:44>> There's a lot of data driven approach to hiring and and stuff like that, which is fine. I think some of it works. But what I really realized is if your answer is not a hell yeah when you hire somebody, when you're looking at somebody, especially for a critical role, then it's a no.

Founder-Led Sales and Closing First Accounts

Sri Chellappa

11:01>> Alright. I'm gonna skip through this, which we've already talked about that. But the the most the most important thing is the timing of these hires I was talking about. So you obviously need an engineer right off the bat if you're building a SaaS software. That's your time is zero. At that point, one to two years is when you first started hiring marketers and then you hire sales exec in two years. And I'm a firm believer that

11:23>> the founders should be doing sales and doing some of the marketing for the first two years. They should be the one closing the first 10 accounts. If you're not doing the and I closed the first 40 accounts because we were bootstrapped and it was we had a long run but I do believe if you if your founder is not selling and at least one of the two founders or one of the three founders, how many depending

11:44>> on how many founders you have, then you're you're not set up to succeed because the founder has to intimately understand the market, understand the customer, the buying patterns, the ICP, all of those things extremely important.

11:58>> So I hired

COVID Hiring Mistakes and Cash Burn

Sri Chellappa

12:01>> unnecessarily. In 2020 when the COVID hit, all my competitors were cutting staff, I was hiring staff. And I was like, I'm gonna go against the grain. I'm gonna keep hiring and because I'm finding good talent right now and I did and it didn't help. I should have been more careful. And we were bootstrapped at that point but we had some extra cash that I had put into the company from a last exit that I had.

12:26>> Which increased cash burn and we really got into trouble in 2021. It didn't rear its ugly head until 2021.

12:34>> I did not follow my own rule of hiring slow and firing fast. Like I said, multiple times, I still do it. I need to remind myself not to do it because sometimes you've you feel so bad about letting people go because you feel like it's your fault. But ultimately, your organization needs to come first.

International Expansion and Retreat

Sri Chellappa

12:51>> And scaling sales before you're ready and this is an important one. I one of the things we did is I started we we we had multi language capabilities in our products. So we said, oh, what can we what can we sell in Europe? Why can't we sell in Asia and other places where we can have other languages? And we started doing that. So we started hiring people. I hired a person in Netherlands. I hired a person

13:09>> in Vietnam or Malaysia, actually. And then I hired somebody in Singapore and in UK. And so we had all these salespeople. And we were subscale to do that. And we don't do that anymore. All of those, we shut down the international operations because we could not figure out how to support them. The sales team did not fully understand how to sell the product in those countries because we didn't understand the HR culture in those countries. Lot

13:33>> of problems there. So we are actually our sales team is actually less than half of half of what it was two over two years ago.

Scaling from $5M to $10M ARR

Sri Chellappa

13:43>> The last part, hiring for scaling. You know, we will quickly talk about scale scaling from five to 10. So like I said, I'm a I'm a rest just a little under eight, seven and a half ish in terms of revenue right now. So this is the segment I'm in, so I'm still learning. So take it with a grain of salt. You know, hiring for expertise and how to fix a bad hire bad hire. So I'll talk

14:02>> quickly about that. The hardest I I think this is the hardest place to hire because you really need somebody who's done this before. You don't need a newbie. You don't need somebody who's been AE who wants to be a VP of sales. Or you don't or you don't need somebody who's done marketing coordination work or demand gen work to be the head of marketing. Because then they are learning with you. I don't want that. You want

14:27>> to learn from them so that like Steve Jobs would famously say, you hire the people, the good people so that they tell you what to do and not you tell them what to do. And that's the hardest one. So you really need to figure out how to hire somebody who's at least done that once before and can confidently deliver on that motion, but still is excited about your startup. So why would they do that? And if

14:48>> that person has done that, let's say, at a bigger startup like Zendesk or somebody like that, why would they come and do it for you? That's a good question. It's very hard. See, that's where the founder has to start selling again to this candidate on the value of that role. But maybe they were not a VP, maybe they were the director and now they are getting a VP chance but the role was very similar, scale is

15:07>> different. So there are other ways to look at finding those people in there. But it needs to be somewhat comparable. If I hire a VP of sales from Salesforce, that's probably not gonna work for organization like ours or a VP of sales from Workday or things like that. It's just gonna be completely mismatch of the scale and culture and things like that. And they should be comfortable being uncomfortable. Even at this scale, I don't know which

15:31>> scale you guys are at, I consider ourselves a scrappy startup. You don't have all the processes. Some of the things you'll to do it yourself. You'll have to clean your own dishes and clean your own toilet bowl, all of those things. You're not going to have all of that necessarily. So that's the important thing here. And I saw this really good graph where I talked about founders selling up to a million, making it repeatable. The making

Finding Skilled Adventurers for Executive Roles

Sri Chellappa

15:55>> it repeatable part is where you need some good processes and that's where you really need some good executive level mindset. And then you're just scaling that out. So this is around, this is where we are for for, you know, contextual purposes. Hiring skilled adventures. This is one of the things I I I really like is you wanna find people who want an adventure. They don't necessarily want a job where they get paid well. They want an

16:22>> adventure. And I think that's what I think about. Do they have an adventurer mindset or do they have I want a big paycheck mindset?

16:31>> Hopefully it does well. They'll get a good paycheck because you're probably going to share some of the equity with them.

16:36>> And one of the things I read, and I've actually did this once before where find a company that you really admire, that scaled really well, and find a second in command of that company who's now because that person can't do that right now because there's already above somebody above them. So that's a good way to find those people. But this is another one. I don't this is my personal view. I don't want people who will say

17:01>> yes to everything I say Because then you have no idea when you're wrong. You want people who will challenge you, but ultimately will be team players. So they can agree to disagree but commit, which is one of the Jeff Bezos thing they talks about. You can agree to disagree but you commit. So even if they disagree with you, they still need to commit. But sometimes they will challenge your thinking and you're like, okay, I was wrong

17:22>> and I need to do better. And like I said, this is a mistake I did. Was getting the sales team before the part and pipeline was ready. So understaffed is better than overstaffed all the time. I absolutely believe it and I really think that's the way especially start ups should be functioning.

Handling Bad Hires and Letting Go with Dignity

Sri Chellappa

17:43>> So what to do about bad hires? If you repeatedly asking the question and the person is in the right role, then the person is not in the right role. If you gotta ask that question more than three times and you you keep a counter and you if if you had three different times the same question in three on three different days, probably not the right person. Have a frank discussion on what might be driving underperformance. That's

18:02>> a really good one to have. And and that you need to be really honest. You know, don't try to hide behind a veil. Try to be soft peddling this. Have a hard honest discussion. Have I've had many discussions with my team members. Some of them, they'll end up don't end up well. That the person will hang up I've had these discussions, so but you need to have them. It's your job as a as a founder to

18:21>> do that. This is an important one. There is no reason to do like what a lot of companies you saw on on YouTube where they were firing people over email or over the message and with unsympathetically. You know, you're taking their job back, but don't take their dignity back. That's very, very important. I've I've I strongly believe that every person we let go still remains friends to this day. Well, at least nine out of 10 people.

18:47>> There are one out there. And I give them a good recommendation. I will refer them to other people. This

18:59>> is very important.

19:01>> Alright. So that's my talk. So like I said, the key items I would say, the first hires are extremely important. So be very careful there. Otherwise, it'll set you back in hiring for attitude. Those are two big ones I will say. And then the last thing I will highlight is rather be understaffed than overstaffed with the wrong people. Thank you. Thanks.

Nathan Latka

19:26Hey, folks. If we haven't met yet, my name is Nathan Latka. I launched and sold my first software company back in 2015 and went on to write a book about it, which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies. Thank you so much for that. After the book, I launched this show and one went on to create founderpath.com. I raised a large fund to do non dilutive deals with b to b software

19:52founders. So far, we've invested in over 400 software founders totaling a $150,000,000. Here in 2024, we're doing three to four new deals per week. So if you're looking for capital and don't wanna give up equity, go sign up at founderpath.com for free to get your offer.