How Metadata Grew 250% in 2021, Then Froze Hiring at 110 People to Survive the Recession (SaaS Open 2023 Talk by Gil Allouche)

Introduction and Overview of Metadata's Journey

Gil Allouche

00:00>> Alright. One more session for lunch. Nice to meet you all. My name is Gil Allouche. I'm the founder and CEO of metadata. We're the b to b marketing operating system. In the next twenty minutes, or maybe a little bit less, we wanna talk about a few things. How we moved from almost dying, almost cash death to hypergrowth, and then how we moved from hypergrowth to survival mode in a recession. Very relevant for where we are these

00:24>> days. I'm gonna finish with a bunch of hacks for the wartime CEO, and we're currently in wartime. So just a little bit about myself. I'm a software engineer. I have robotics background. I spent about ten years as a VP of marketing post my graduate school, and every lesson that I talk about here is written in blood and sweat and tears. Nothing about this is theoretical. So I'll start with the revenue growth, because that's how Founderpath slash

2020 Survival Phase: Cash Crisis and Product Market Fit

Gil Allouche

00:51>> SaaS Open likes to put it. So this is how the revenue growth looks like. There's a nice peak in the middle. That was our hyper growth mode 2021, 250%. It was amazing, but it didn't start that way. And so in 2020, we finally hit product market fit. It took us three years to build a product, sell it, and figure out who do we sell it to successfully. So we were very happy about the product market fit,

01:16>> but we were not happy about the fact that I had about $500,000 left, burning about 200,000 every month. So we had about two two months of of life. I would not sleep well during that time. Lot of a lot of heartbreak during that time. And so we had to and I remember at some point, you know, we had a bunch of term sheets from kind of short VCs completely changing the company, de diluting diluting so on

01:44>> and so forth, but we didn't we didn't do those. We wanted to make sure that we have enough runway to survive this this time. So the first stage that I'm gonna talk about is that survival phase that I think every one of us here experiences at some point, whether the market is good or bad. In order to to get through that first initial stage, we had to first and foremost remove a lot of burn. We had

Cutting Burn: Layoffs, Vendor Deferrals, and Pay Cuts

Gil Allouche

02:13>> to cut our company significantly. So right in there, we cut about third of our employee. We also stopped paying every essential vendor. I know this is not very popular to say, but I went through each and every spend with my CFO, every spend, from a consultant to to any software vendor, really anything, and if I couldn't afford it or it was not critical, we didn't pay, which means a lot of people were pissed, especially American Express

02:43>> credit card, and a bunch of other a bunch of other vendors, but we had to do it. It was either paying it and being at cash zero or postponing it, essentially. We eventually paid all of them, but postponing it. Also, entire management team took a 20% cut, and all of the salespeople converted their commissions to equity, and they wouldn't have done it if we didn't ask them to do it. And so we said, here's an option.

03:05>> You're gonna get more options than this commission is worth, and it's gonna get you closer, gonna get us closer because you're essentially investing in a company, and it saves us a lot of cash. And we had all of our salespeople and many of our VP of sales committing to doing that. And then finally, we took debt. Essentially, anyone who would give me cash at that point, I would took I think I almost signed a 35% interest

Offensive Moves: Convertible Note and Sales Team

Gil Allouche

03:29>> rate. I didn't end up signing it eventually, because I got a better a better one, but I was ready to do it. At that stage, you really wanna save your company. Now, when you have a situation like that, a survival situation, you don't only wanna take defensive mode. You also wanna take offensive moves, because when everyone is panicking and and hunkering down, it's kind of an opportunity for you to make bold moves. And so first of

03:52>> all, opened a convertible note. We couldn't raise an equity run at that moment because we didn't have enough time, and going into a VC when you're cashless is a bad idea. And so the first thing we did is to raise a convertible note for our tribe, and when I mean tribe is customers, friends, existing investors, advisors, and even employees, and we end up raising a nice convertible note. And with that cash, we had much more confidence

04:16>> to go and raise an actual series a. The second one is we invested in sales. We hired sales team for for Salesforce that already worked together with one another. Great culture. It was very strong, and they just we spiffed them on cash deals. Essentially, if they got paid upfront, boom, they got an additional bonus. That's what we optimized towards. And then finally, we found a piece in our product that was very well suited for a terrible

04:42>> time. It's called MetaMatch. Today, it has a free trial. You can you can go to our website and and start with it, but we found out that that piece of software is very relevant for recession. And so we made that a bigger deal and called every customer and offered them that deal.

Drastic Cash Measures: Selling Receivables and Credit Cards

Gil Allouche

04:56>> Now, I like to talk about drastic result because people sometimes don't understand. On the on the left hand side, you see what convertible debt means, you know, or some of the venture debt, sorry. So we essentially sold our accounts receivables. We we went and said, hey, look, we we just closed a $100,000 in MRR. Give us that $100,000 because we're only gonna get paid at the end of the year. So any cash that I can take

05:17>> ahead of time, boom, a success. Second one, I maxed out all of my credit cards. American Express would call me daily. I would pick up your phone and tell them I'm not paying you anything. When I have money, I'm paying all of it. Right now, you can keep calling me. I'm not paying you any of that. And third one, I would keep getting these notifications on my Mint, because my credit score went from about 750 to

05:35>> about 250, 300. Was not great. A bunch of derogatory marks. I don't care. My company survived, and I knew it's gonna it's gonna thrive eventually.

05:45>> And so look at that adjustment. That line, that small line going very close to zero, you can imagine, didn't sleep really well during those times. Heart waves were very high. I think I smoked a lot of weed during that period of time. And we course corrected. And so we almost almost got to zero, but then we course corrected, and once we course corrected, guess what happened? I got a lot of options from VCs suddenly. They were

06:09>> very excited of investing in the company, and they put our Series A, And we did not we did not start spending a lot of money after that. We actually kept the optimization phase, and then got additional funding. And so what was impossible a few months before suddenly was was our reality. If if we didn't do those things and just repeated it, I wouldn't be here telling talking about this today. And so one of the lessons learned

Lesson: You Can Change Your Business Tomorrow

Gil Allouche

06:34>> that I had, and one of my advisers told me that because I was like, hey, I can't make those changes. We're already going on this trajectory. And he told me, you can change your entire business tomorrow. There is nothing stopping you besides your own limiting thoughts. And so that's something that I think is very important for us to remember, especially when we need to pivot.

2021 Hypergrowth: Culture Shift and Revenue Goals

Gil Allouche

06:52>> So survival is important, but this is not the reason we signed up for this for this role. And so travel is really what we're here for, growth and and the the and the victory. And so moving from that stage of travel, was a very interesting experience. So in 2021, we had money in the bank, and I had to completely change the culture, because if until then it was we can't spend anything on on anything, now it's

07:17>> you have to invest. You have to invest not only in the short term, you also have to invest in the long term. And so we really had to make a big shift, and I can tell you something cool that happened is that we grew a lot more than we planned to. If in survival mode, we cut our goal by 33, 40%, in the Thrival mode, I went back to my VPs, to my to my C levels,

07:40>> and we increased the goal three times that year. We're supposed to grow from two to five, then we said, hey, we're doing well. Let's do it to seven and a half, then 10.4, then 12 and a half, and we ended up at 12.2. So pretty cool to be able to adapt both ways. When you're doing well, you don't know if it's going to always continue, so max it, and when you're not doing well, pull back. Very

08:00>> important adaptability.

08:05>> With the AEs, one of the things that we did is we actually split them this time for higher ACV and ARR. Cash was not a problem. We raised Series B in a great market, great valuation, nothing as great as Chili Piper, but pretty good still, and we were able to use that money to invest in our growth, in content, in a conference with 8,000 registrants, in a community, in a brand, in a bunch of things that

08:25>> we didn't have money for before. And then we made that transition, know, cultural shift from survival and PTSD to thrival and growth, it was a good time to trust yourself and build the go to market motion, not being afraid of actually seeing what repeatability do we have. And we found out that we have pretty great repeatability.

Decision-Making Under Pressure

Gil Allouche

08:50>> One of the lessons that I learned in in in those times, and I had to shift the entire culture, is to not make a decision out of fear. Every time I was panicking, I was having a hard time, we were struggling, I would not make a decision. I would I would take a break. I would go to the beach. I would take a walk in the tenderloin. I would again, I would smoke one, or I would

09:11>> just take a meditation, whatever it is that I need to do to relax. When I'm in a relaxed mode, I make much better decision. Not to say that you have a week to wait, but figure out your psyche, and then fix it, and then make a decision.

09:24>> And so the most interesting part in this presentation, I think, is how to adapt back from hypergrowth and adapt where we are today, because right now, the market is not the best, and you have to adapt to it. I don't know if it's affecting your business. It's definitely affecting mine. And so what did we do to adapt to the recession that we are today? And so the situation arises that we thought everything is gonna continue. That

Adapting to Recession: Q2 Flattening and Reality Check

Gil Allouche

09:45>> hyper growth in 2021 is just gonna continue. It's gonna be amazing. We're gonna keep doubling maybe even more every year. It did not happen. This is what happened in reality. Q1 was amazing. We grew exactly as we planned. Q2, we flattened. And so then what do you do? You know, investors actually called me. It was funny. In q one, my my new investor called me and told me, Gil, between the spectrum of CEOs who spend too

10:08>> much and CEOs who spend too too little, you're definitely on the spend too little spectrum. And fast forward three weeks into that conversation, into that phone call, he told me, hey, Gil, what's your budget cut plan for the year? Because then every the Shopify by then went down, the crypto went down, and so, be cognizant of of the advice you get. You're gonna get a lot of advice. You have to distill it on your own. And

10:31>> so what do you do? What do you do when you have a reality check like that? When the situation outside in the market is crashing, there's wars. This is more recent with Silicon Valley Bank. Our money was in Silicon Valley Bank. The stock market is going down, and meanwhile, your business is exactly the opposite trajectory. Our number of employees going up. The burn rate was going up and giving me a heartburn. And so the most important

10:56>> thing is if you see something that is not working, just make sure not to repeat it many times. That's it. You always have the opportunity to change. And so it was funny. I was quoted in Dave Gerhardt's book about the series b trap, and although I didn't fall completely and die into the series b trap, I definitely stumbled upon it myself. And so after we raised the series b, there is this story that you didn't figure

Get Runway and a Path to Break Even

Gil Allouche

11:19>> out everything about the business. You keep investing, and actually, you don't get the growth, And if you fully fall into the trap, you run out of money, and then you have a fire sale. And so we found out about that very quickly. Okay, we're flattening. Let's change trajectory. So how did we adapt? What did we do? First thing first, get runway. We want to make sure at any point of time we have at least one and

11:41>> a half years, maybe two years of runway, and be on a trajectory to break even. It's always important, once you're a master of your own domain, you can make good decision. You have confidence, you can make good decisions. When you don't need money, you can get money.

Cutting Earlier: Layoffs and Retention Focus

Gil Allouche

11:54>> The second thing is cutting earlier. Every time you get lots of advice, again, you have to distill it as a CEO or as a founder. I got a lot of advice. I think we we not to fire before the holidays, not to fire now. This is not a good time to to let to to do the layoffs. And the truth is, it's never a good time to do layoffs. Never no one ever wants to get that

12:11>> phone call, to get that Zoom, to get that that meeting. But guess what? If I waited two months like I was advised to by pretty much everyone, then I would have had to lay off eight more people, seven to eight more people, because that's how the burn works, right? You have two more peop you know you have to fire them, do it earlier. You know you have to cut costs, do it earlier, because you're going to

12:30>> have to do less if you save that time.

12:34>> Of course, we negotiated the board KPIs. Suddenly, 100% growth was not necessary. No one was expecting it even. 50% growth is above and beyond expectations for boards, even for a hyper growth company. And then we focused more on retention. It's much lower cost to increase revenues from existing customers versus from new customers, and so we shifted. We shifted there because that's the thing we had to learn during this stage.

Optimization: Removing Inefficiencies Across the Business

Gil Allouche

13:01>> Another part that I think many people don't put enough attention on is optimization. When you grow, you bring in inefficiencies, for sure. Every company that grows brings in b players, c players, workflows, inefficiency, bottlenecks, and you don't get a chance to fix it until you have to or until you get acquired, and a PE makes you do that. And so if you can do those things earlier, the better, and it's very hard to do it internally

13:27>> without help from external people, because when someone builds a workflow, even if that workflow sucks, they are emotionally attached to it. And so you have to bring in someone else who is not emotionally attached to it, and can have a beginner's mind, and show you that you have a problem here. So that's something we're doing across across the board, in marketing, in sales, in product, bringing in those outside people. Hey, help us identify the bottlenecks. Help

13:49>> us identify efficiencies, because once you increase, for example, the marketing to SDR or SDR to sales handoff, 5%, $10,000,000 pipeline just comes out of nowhere that you don't have to buy.

14:01>> And then finally, just like with every other defense offense, you have to make offensive moves. Downmarket, when people are panicking, is a great situation to make some bold moves. And so we use the equity that we and the valuation that we benefited in in a good market and use it to acquire a company, and use it to make some strategic moves. And so don't take all the runway that you're saving just to kind of hide and

14:24>> wait for things to get better. No. Change your own situation, make some strategic moves with the money that you now saved. Most important lesson here by far is to cut earlier. I learned that when you make that bold choice on your own, it's never going to be popular. It's always going to be the right thing. It's better to let go of 10 people, 15 people than the entire company.

Strategic Bets: Acquisition, PLG, and Account Management

Gil Allouche

14:46>> And so we definitely cut the the the ARR goal. We shifted the HR from hiring to maintaining in culture and improvement of the culture. We cut every marketing program that didn't have a positive ROI, and by positive ROI, I mean revenues. Money in, money out, it's profitable. And then of course, optimizing the acquisition funnel. We also made a few cool strategic bets. So we made our first acquisition in October last year, which already is panning out,

15:13>> which I'm very happy about. We hired a customer success and and the account management team for the first time. We had an account management team. We didn't even think about that before, and then we launched a PLG Motion, a product led growth motion that is starting to pan out as an amazing bet. Not all the bets we made panned out. I'm not showing you the like seven, eight bets that were a shit show, I'm showing you

15:32>> the three that were very successful because that's how it goes with bets, and it was 100% a good idea to do those. So a few hacks just to show it's it's really not rocket science, but to show you any examples, just like with the reality check of a drastic move, what does it mean to do a budget cut? So we were supposed to grow to about 200 people, and we're at about 110. And so we really

Budget Cuts and Hiring Freeze Details

Gil Allouche

15:54>> had to make hiring freeze completely. So about 30 people that we're about to hire were not hiring, then and we had to let go of a lot of people, some contractors, some full time people. I had a number because I knew how much runway I want, so I had a number. I was conservative, and it panned out to be a good idea. You don't wanna cut too much, you don't wanna cut many times, but most important

16:17>> is to make the right decision. Timing and popularity is secondary. Marketing programs, as you can see, everything that is revenue positive stays. Everything that is not revenue positive goes out the door. Product led growth, this was expected to bring us about five to six trials. We're already at about a 100. After a month and a half, this is something that is revolutionary. Without cash restrictions, without a market that is problematic, we wouldn't make this move. And

Workflow Optimization

Gil Allouche

16:46>> so you can take challenges and convert them to opportunities. This, without getting into the details, is how we're optimizing our workflow. And so you can see, we're really analyzing every area from the website, from the chatbot to the forums to the SDR, all of those, and see where can we make efficiencies. And then final, but very happy move is to acquire a company. I didn't realize we'll be at a position, but when the market crashes and

Closing Lessons: Bold Acquisition and Convertible Notes

Gil Allouche

17:11>> companies are struggling, there are opportunities to actually make strategic moves, strategic acquisitions. So we made our first one, and we're integrating it really nicely into the company, providing sticky value for the customer, and it's just a nice win. So making bold moves in a in a tough market is highly encouraged. Most people don't do it. You'll be the 5% that is gaining market share in a tough market. Highly recommended. And then the convertible notes. Look, we

17:39>> were raised just before the Series B in order to gain confidence. I raised, I think, a 5,000,000. I plan to raise 2,000,000, ended up raising 5,000,000 over a period of one month with convertible notes. It's super, super easy, especially when the market is hot, but even when it's not super easy to raise on convertible note, I highly recommend it. That's it. These are the lessons. It was a pleasure presenting to you. Thank you very much.