E382 | Robin Haak (Robin Capital) & Jerome Ternynck (SmartRecruiters): Building teams and scaling impact

28:48It's like a 10 million TCV, over 10 million TCV contract. The CHRO calls me to tell me that we are awarded the contract. And you know what she said? She said, Ah, Jerome. Yeah, I just want to tell you, you guys won the contract. I'm super happy. And obviously, you seem to have a great product. I mean, my team and your team, I've been speaking for months. You have all the functionalities. And so this seems great. But I'll tell you, for me, what really, really made a difference is what you guys stand for, right? Because you guys have, like, we seem to have the same values. And if we have the same values, then I trust that nothing can go wrong between us.

29:24So I'm really excited to get into this partnership with you. And that was our largest contract ever. Purpose is everything. It just trickles. It's the aura you have around you. It trickles to everything. And a company without purpose is Yahoo. Yahoo lost its purpose. And then Google came in and, poof, bye. Then, my friends, I would love to go to the second bucket, which is, you know, Jerome, you build a Centau, a company that makes millions of revenue AR, recurring revenue, and everybody from a million, or even from start, needs to understand on how to end-to-end, how to create this, right, ultimately.

30:07And I guess on go-to-market, there is from lead gen and channels and marketing to sales to success and support. Could you guide us through there to start with more top-down, how you see this flow and how you see on building a SaaS company? Building a SaaS company today is a good recipe for it. And we can talk about the metrics and the methodologies. But the one thing I really like about a SaaS business is it's predictable. That's what investors like as well. But as an operator, as a founder, it means you can rely on the system to actually grow and you can optimize the system as opposed to having to be on the underlying product.

30:52The simplest way is how do you acquire customers? How do you make them happy, grow them? You look at those big entities and you just turn it to make it more efficient all the time. For me, operating and growing a SaaS business, it's very clear, very clean. You know, like operating a marketplace is completely different, but it's also very clear, very clear. You know what to do if you are operating a marketplace. So I think the building as a B2B SaaS company, like if you're Series A and you're like, okay, things are starting to work. My one piece of feedback would be like, follow the playbook, like buy the book.

31:35Just do it by the book because the book has been written on how to build a big cloud SaaS company. I witnessed you in different roles. I witnessed you being a venture partner and talking to our SaaS founders in the portfolio. And you talk a lot about ICP and customer love and narrow, narrow ICP. At the same time, I remember when we were hitting, I don't know, 25 million ARR, something like this. Dave Carter came, the president, former CSO of Cornerstone. And we were going account model and we wanted to have things also more. You could even argue to a certain point ICP on geography, on mid-market enterprise.

32:13So it never stops. You could almost say it never stops to focus. And I would love to hear your thoughts on this. Yeah. The first thing that came to mind is I remember that time where we were everything except focus. And now I can hear myself give to people other advice. I suppose people learn from their mistakes. That would be a good way to think about it. But it's really hard. And I'll take smart recruiters as an example. Every company in the world needs to hire. Okay, great. You build a good recruiting software. Guess what? Everybody wants to come. And if you let everybody come, then suddenly you are a servant of all, a master of none.

32:51And I think this is a very interesting part of the journey of a SaaS company is when you transition from product market fit, who has a problem that I can solve and they are willing to pay me enough money for? That's iterating on that. And then switching to go to market fit. how do I actually acquire and make successful enough customers at the right level of investment and effort? Two extremely different problems. One says, I opened a restaurant, the whole neighborhood is coming, and they love my food, and they are clapping every night. And the other one says, I have a recipe to open 2 ,000 restaurants next year, and I know it's going to work.

33:38It's a different world. It's a different way of thinking, and it's different things you have to assume. And I think people get stuck here and they start to, they get pleased by the feedback, the positive feedback of many different customers. They keep exploring, but they refuse to transition. Certainly I did refuse to transition into, okay, forget you all. I'm going to focus on these people and I'm going to try to find a million of them to actually do that at scale and then start to work on your go-to market. How do you actually sell? How do you implement customers? How are they successful? for what's your upsell level?

34:14How can you get more gross retention, more net retention, reduce your cash, reduce your time to sell, increase your IR, all these things. Like then you're building a gross engine. That discipline is, I think, key to scaling past the 10 million or past 20 if you want. But once you get to that, okay, we have a lot of customers. They love us. We have good traction. They keep calling us. It's amazing. VCs are doing. That's great. That's 10 million. To get to 100, I think you really need to get to that, like an efficient system, to get to 100 with velocity, right? Not scratch your way to 100. We go a little bit narrow.

34:54Yeah. And maybe then we focus on sales. I could ask with a simple question that people are divided about, is the rep, is this part of marketing or is this part of sales? But besides this, let's say you are the millionaire, you want to go to 10. What's great sales? What's great onboarding? what's great web and e-work? How do you define this piece? And I think many listeners think about this all day long. I think, so you start by the metrics. I like to start by the metrics. Simple metrics is a dollar of sales and marketing gives you a dollar of subscription with a decent cost of net retention. Things look good.

35:32Okay, great. Start with that. How do you spend your dollar of sales and marketing? If you are Salesforce enterprise, You spend 50 % in sales, 50 % in marketing, alliances, and all that. Then you start to decompose. And you make your assumptions around that, and you measure and optimize each function. And I think if you do that, you end up really optimizing the profile of your reps, how much quota they can carry, how many leads they can look after, what level of leads they should lose. And you get to the right balance, right? I see companies are like, well, I have a rep and an SDR and a pre-sales and our ASP is 25K or our average ACV is 25K.

36:20You don't need, yeah, dude, this is not going to work. This is not 25K. If you want your rep to be profitable, then they need to sell a deal every two weeks or so, something like that, right? to get to a 600K quota, which is really a minimum. This is not happening. And you're just not going there unless you have an inbound engine and then you just get rid of the pre-sales person. You don't need an SDR, right? So there is some economics here that are actually not difficult to fine-tune, provided you focus on it and then you follow and validate your assumption. And, of course, try to not burn too much money while validating that.

37:04And I love saying all these wise things because at SmartCookters, we did completely the opposite. So we started as a free software. We had 50 ,000 clients before we had one revenue, one dollar of revenue. Then we pivoted to the world's largest companies. We left behind the free cost. It was a whatever. We all make our mistakes, right? But learning from that, the optimization of the growth engine is, I think, the most important, provided you found your product market. I love this. it makes me happy why because you know i thought myself and then you see you know you hit it or not then you go to the customer and so on but i'm also now talking to all these founders and some some of them even in growth you know i invested growth before and often i see that the the ar the growth the net retention and and the burn and it's not not somehow not correct the ratio doesn't fit the burn is too high and they are pushing for growth but they are dropping out because the The net retention is not high enough.

38:01And it's ultimately, you know, they're pushing so much for growth, but at the same time, they are not sustaining. And then you don't see the overcoming, you know, and there's several ways on how to solve this. One obviously is making the customer like avoiding churn. And then another thing is maybe going up market and going more into enterprise direction. You talked about higher ASPs, ACVs or TCVs like longer contracts. how do you and we often talked about it ourselves when we went enterprise in comparison because short-term competitors went faster and you we went a longer term journey and it was very hard and took a lot of effort to to switch this into this direction but it was worth in hindsight and I was wondering what how do you see this journey yourself and then what do you recommend founders today?

38:49There is a natural pace of learning that is hard to overcome. And the best way to make mistakes in this area is VCs. VCs giving you too much money and on too much growth expectation, which you end up scaling things that are not proven and making too many experiments or expensive experiments, it needs time. You need time to build a good model. And if you are working under a good financial pressure, you end up making better decisions than if you remove the financial pressure. If you remove the financial pressure and you replace it by a gross pressure, then it's a recipe for mistakes. And some people will say, yeah, go big or go home.

39:39It doesn't matter. We probably could have done it with 50 million less than what we did. but anyhow, we are now the world leader. Great, maybe that can work. But I'm more of the school of trying to go step by step and optimize. So I think you work your problems one at a time. Am I good at getting leads? Am I good at converting? Do they sell? What is our price? How do I implement customers? Are they happy? What does the gross retention look like? Then what is my upsell strategy? What is the net retention? It's a simple funnel, but every component needs to be optimized. And don't scale something that doesn't work.

40:18We decided we need customer success managers. Let's hire 20 of them because each of them needs to have a portfolio of 2 million of ACV. And we have 40 million. So, you know, 40 divided by 2 is 20. Let's hire 20 CSMs. No, that's not the right way to do it. I zoom out and then it would be the overlap to the next bucket. And the question would be, and then we go into fundraise, which I think would be interesting for the GPs listening, but also to founders listening on how we see how to fundraise. Zooming out, the last question on this bucket for me here is you often talked about CEOs and leaders need to be athletes.

40:56You even, at Smart Recruiters, you have these, you have the values, the core values, and one is to take responsibility and be the CEO of your job, no? and I would wonder if you could speak to this topic and then from there I think it's great because then we back into the CEO's position and then how to, you call it herding or we call it all herding cats, right? The art of fundraising. I mean, CEOs are actually in that you have a good idea as a founder, as a CEO and you know what? This company is going to get as big as you can take it. We all agree that's true. So then the question means, okay, so how far can you take it?

41:35How far can you scale? What are your personal limits? What do you need to know? What do you need to learn? What do you need to improve? How do you need to operate? Who do you need to hire? What are your personal limits? And I think recognizing that you are, as a CEO, you are the main limitation. Sure, you are the main driver, but you're also the main limitation, acknowledging that, being prepared to move out if it actually turns out that you are scaling out, and being committed to remove that barrier to scale, that is yourself. So for me, this is a critical piece. And you see it's all the good founders.

42:11They are super, they are constant learners, super curious. They are always trying to figure out what to learn from every conversation. But it has to be an active process. Like you, at least for me, that work, that you actively work on yourself and make a list of the things you're not good at, what you want to improve, how you're going to get there, like literally work on your CEO competency and likely get a little bit further or a little bit faster than you would otherwise. Can I ask you before we go into the final segment, where do you see the VCs, and I want to ask you as well, Robin, where do you see the VCs' capability, so to say, to advise founders in the right way and work with founders in the right way on these two dynamics, both the scaling part and also being thoughtful around the journey that you're on as a founder?

43:09The things that VCs are not for a founder is advisors. They're not your advisors. They are your investors. And as a founder, I think you need to recognize that and serve their needs as investors at the board, on reporting, on liquidity, on a lot of things, but treat them as investors. The moment you take your VCs as advisors, which is the natural view at the early pre-seed stage, like you get money from Robin and you're like, oh, Robin, what should I do? What should I do? That's good at the beginning. But later on, I think it's a relationship that has to be different and find your advice elsewhere.

43:52VCs are great at pattern recognition. so I definitely would go to VCs for pattern recognition. Like what are you seeing that I am not seeing? They're great like market makers, market connectors. So go there for that. You mentioned recruiting. Exec recruiting is a good place to go. Who have you worked with that's amazing that I should hire? So that's kind of where I would see VCs. And for VCs themselves, like how do you add more value to portfolio companies with those elements? with those elements, I would say, is where it's the most valuable. It's a nuance. Ultimately, you're a founder. You're in there every day, 12 hours, you're working, and there's a lot of things you need to do with your team.

44:35And the VC comes in a certain amount of time that is a percentage each month. And if you professionalize, and I agree with Jerome, you're the one reporting and you need to manage your board. You need to manage the investors you work with and on the values that they can bring us. They have value at teams and on talent and on comms and on other things, but it's granular. And yes, they can pitch you venture partners. We have venture partners. I love Jerome. I think they love talking to Jerome, but ultimately it's in our ones. It's great. It has a good impact, but it's all to a certain point. Ultimately, I agree with Jerome.

45:15Also in growth, it comes to executive search, board members, M &A acquisition, other things they see, competitive benchmarking um geopolitics where to go um insiders we had inside partners as a in the board and as investors and they have great benchmark for especially for financials i can remember daniel jerome who always had been challenged on how to do things better or or like what are good numbers and how to compare so especially if you come to stage in bcde it can be extremely valuable from like the intel comms perspective and earlier it's it's a noise it's granular it's great to have support and i think most valuable on these follower vcs like myself is often if they're not founders who cannot support you because they haven't been there it's maybe introductions and network which is the number one thing they do right and that's fair short on time um we make two more questions on the fundraise process and then i want to talk about rip it's jerome because it's your thing um the the two questions we have you're talking about leadership in Jerome and working with VCs.

46:20We call it herding cats, formal, creating a pitch deck, perfect pitch deck, sending it out or not, or teasers or blurbs or warm intros. And then you funnel them, you talk to them, you heat it up, and then you want to have term sheet week the same week, like eight weeks in, and then we want to have 10 term sheets the same week. And then we negotiate a little, and so much of it is vision yet not there yet. and you're sending the future, right? And often in Europe, I'm also sending you sending the past. This is what we have achieved. We like to have money. But then in the pitch deck, I never see where we're going forward to, right?

46:56And then they will evaluate you on the past and not on the vision where we are going. But that all said, Jerome, how do you see herding cats and how you make it work? I think the first thing I remind myself is that when you meet a VC, it is in their best interest not to give you a term sheet. unless they think somebody else is going to do it before them. So fear of missing out is actually the only driver of term sheets. It's the only thing. And everybody can produce a term sheet in 24 hours. We all know this, all these things. We need a little bunch. So if you think that, or if you accept that FOMO is the only driver, then the question becomes, how do you organize FOMO, right?

47:43And what do you need to do to prepare the market and to build the relationships and the deck and the positioning such that you actually create that fear of missing out? And if you cannot create it, then I would really like almost go in and out of the market. Like 10 VCs, no FOMO, something wrong, go back. because if you go 10 VCs, nothing doesn't go. Okay, 50 VCs, still doesn't, 100 VCs. Now suddenly you are just this person who stinks in the room, right? And why has everybody passed? Something wrong with your business? No. So I think you prepare the raise and you keep it exclusive and silent and quiet with pockets of VCs that you have worked with before.

48:40So that's one. And yes, I think we did A, B, C, D, E at Smart Recruiters. And I think for A and B, A, I managed to have two competing term sheets at the same time. It was a bit messy. I just arrived in San Francisco. B was a complete fuck up because we had no revenue trying to raise a series B. So that was not a good idea. But we did it. And then C, D, and E, we got several competing term sheets on the same day and led to us being able to decide and have the right investors, actually. We had inside to C &D and Silver Lake come in for Series E. So with super quality investors coming in. But the point there is, I like to write the deck like 12 months out.

49:24You're going to raise a Series A in 12 months? Great. What does the deck say? What does the deck say? What are the metrics? What are the numbers in an ideal world? And then work towards that. What does a Series A investor want to see? And then go and engage VCs about that. Hey, I'm thinking about raising an A next year. What would you like to see on the deck? Well, it would be interesting if this, this, this, this, and that. And then by the time you have those conversations, you build a relationship. They tell you what's important to build accordingly and you hit the market with warm relationships of people that have been following your trajectory.

49:58And I say, don't ask for money in the first two meetings, even the first three meetings, if you can. Just ask for advice and build relationship. The last one here, we did D &E together. How do you, in an ideal world, when you could ideally form a board and a cap table and an equity story, what's your advice? So there are different elements here, equity and board, right? So your equity story, I think you need to respect the different specialties of the different VC players in the market. In other words, I wouldn't take a pre-seed from Sequoia. Yes, it's great. But then if Sequoia doesn't invest in your seed or your Series A, you are in serious trouble, right?

50:46If you take people that are multi-stage, sorry, I'm nothing against the multi-stage big funds. But if you take multi-stage, you take a risk. And the risk is clear that do they have a follow-on? So I would keep the right phones at the right time and then build over. I would ensure that you minimize your equity needs. It goes without saying maybe, but it's actually important to say it. Like fundraising is not a success. Fundraising means, shit, our business is not profitable. We need more money to try and make it work. That's what it means. And then you go with your price release. We raised 60 million or 500 million, whatever.

51:28But it's actually a failure if you think about it in the grand scheme of things, right? So if you can avoid it, I have this conversation with a friend of mine who did a company. And I was an angel in there. He never raised. They never wanted to raise. And it took time. And they did a secondary this year where they gave 1 ,000x to their angels, right? And you don't give 1 ,000x. Yes, whatever. But it's not the point about me, but it's like a thousand X. You don't deliver a thousand X to yourself as a founder unless you really optimize your equity. So don't raise, wait, wait, make it. You know, the market is helping you at that, right?

52:10Don't raise and don't try to make it. Oh, we raised a hundred million. I know it helps, but this vibe is organized by VCs. It's not in the best interest of founders and of companies. So take time, build the right company, raise less if you can. and board yeah board is you have to manage your board if you have a board with only investors it becomes a one-sided one-trick pony because they think in the same way it's a mistake we made at smart recruiters we had you know A board seed B board seed C and E so then you have only investors no operators and the conversations are are turning in circle around VC topics so manage your board actively to bring in other people that bring other expertise in there.

52:57It's an important part as well. At Revaya, we try to have no ego, and then Revaya doesn't take board seats. So Revaya Growth Fund, where I worked before as a GP, we place third party who can support you best in the field you're actually working at. And I think VCs should be starting doing this, like sending in there that they, we incentivize them with our own carry, but sending people in there who are better than you and who are representative to you. You said, Jerome, that if you fill it with VCs, it ends up being pure VC topics. What would you say are the blind spots that you get if you bring a board just of VCs?

53:38The first blind spot you get is when you have a group of people who likes diversity. So if you need inner board, you need multiple perspectives. If everybody listens to EU VC and everybody talks about the same trends, then it's an echo chamber. So you avoid the echo chamber by bringing other people out. The other thing that you miss or that you need to balance is founders are often playing an infinite game. and VCs by the nature of phones are playing a finite game. And when the infinite game and the finite game conflict, usually after 10 years, then you turn into different discussions where the interests of the board or the investors is not aligned with the interest of the company on the longer scale.

54:40And that's where also it's important, right? Think about the CEO of CVS Pharma in the US that comes to their board and says, I think we should stop selling cigarettes. I mean, we're like, our motto is let's make Americans healthy and we sell cigarettes. This is ridiculous. We should stop that. Then the board member is like, yeah, but we make 5 billion a year with cigarettes. Like, this is a hard pill to swallow. Well, yeah, but still, we should do it. Like, who wins that argument, right? If you only have investors, obviously you keep selling cigarettes and then you kill your company because you cannot make Americans healthy if you sell cigarettes.

55:12Anyway, the example is famous, but that's very true, I think. With the time and side, Jerome, you switched from being the CEO and founder, or sorry, to becoming a chairman, a shareholder, and now you started a new mission again. Yes. And a long-term mission and a very important mission and something that I deeply admire. I think you talked earlier about why, but let's make – it's called the ripples, and I want to hear all about the why, the how, the what. Yeah, ripples. You know, it's interesting. I came out of smart recruiters. First, I said, okay, enough candidates. 30 years of helping people.

55:52So let's have impact in another place than social. Obviously, looking at sustainability, big ocean fan. And I look at where we are as a society, as humanity. And I think we actually have the opportunity to become the first sustainable generation. And by this, I mean the first generation that will leave the planet better than we found it. and historically we didn't have a choice like i mean you know our ancestors killed mammoth to eat and they cut trees to build houses or burn coal or now burn oil like we've always been takers of the planet we've never thought about okay what ecosystem services do we provide back to the planet and how do those two balance out today we have the technology to do that we actually have the technology to live in a planet in a sustainable way, which is incredible when you think about it.

56:43Like, you know, sky's the limit if you can do that. Like, we can continue to consume however we want if we do it in a sustainable way. And I think that's a goal worth fighting for. So at Ritmalt, I teamed up with a friend of mine who was my co-founder and the two previous company. And we decided to pull some capital together and to actually go and help entrepreneurs who have ocean-positive solutions and help them scale faster and bigger, like basically putting our little bit of money, but mostly our expertise as operators to help them scale. There's many, many different segments where you can actually make really good ventures on ocean.

57:27Think ocean systems, ocean data, maritime decarbonization, blue foods, there's a lot of area. we focused on ocean just because it's a bit of an overlooked area. And yeah, that's it. That's our mission. And I think we're, by the way, I think we're going to make a ton of money doing that, right? This is not a philanthropic exercise. No, I'm serious, right? Because people are like, okay, so is it impact or is it money, right? I'm like, no, no, no, no. Actually, money drives impact. Like you align it properly, money drives impact. Smart Recruiters is an example. or you want to help people find jobs?

58:03Okay, that's great. How many can you help? 10, 20, 1 ,000, whatever. If you want to help 100 million people somehow with their job search, you better find a way to make money out of it. Otherwise, you're never going to reach that scale. Same is true for every area. And I think the whole world is transitioning to a sustainable economy. Services, goods, transportation, everything. So if you're not transitioning already, you better think about it. So we have two people listening that could be interested in joining this journey. So one is probably Andreas wants to invest, Jerome. Can Andreas and Robin invest into your fund?

58:40What kind of fund is this? And two, I think founders want your money. What kind of fund? Is it pre-seed, seed, whatever? Could you define these two things? Because we all want to work with you now. Sorry, Andreas, again, I'm always cutting you. I feel horrible. bit. I was just about saying here that you must be a master user experience in TeamEar because I was sitting here so is this a fund when I was reading on your website and then literally the sentence I read afterwards is, Ripples is not a fund. So Jerome, tell us, what is Ripples if it's not a fund? It's an ocean investment firm. We invest out of our own balance sheet.

59:22So we are not in the business of managing other people's money, which is pull some capital and we invest out of our own balance sheet. Maybe over time, we'll increase that balance sheet and get it to a certain scale. I think we need, by the way, in impact, we need more liquidity, evergreen mechanism to fund innovation. Because right now there's a big gap. It's like, yeah, you want to fund innovation in sustainability. Great. Give your money to this impact VC. You'll see it in 15 years, baby. with maybe good returns, maybe not so good. I mean, this works for certain LPs and so on, but it actually is a hard proposition still.

1:00:02And so maybe we'll get to bridge that. But for now, we don't raise money. We don't take anybody else's money. And to answer your question, Robin, we invest at the kind of Series A, pre-Series A, seed Series A in that stage where they have product market fit, like, oh, this thing to smell good, and they need to build a go-to market. Like, oh, I have invented a new desalinator that works with the sun, produces fresh water, cheaper and better than everybody. We already have seven or eight. This is starting to work. How do we build a thousand of these things? Or we are taking wastewater from farms and we actually make proteins to feed fish.

1:00:42How do we make more of those? Or we are restoring corals. We have a farm that's restoring coral 50 times faster than in the wild and many contracts coming through. How do we actually scale that? So more the scale phase, where I think our skill as operator is... But then VCs who want to work with you, they take you as a follower, right? Or what's your... Still, I want to know, let's make it clear. Like, who works with you? Like, what's the ticket size? We work in professional soliciting. Yeah, average ticket size for us is 500K. So we are kind of neutral in the balance sheet. And our pitch to VCs is pretty simple, right?

1:01:19You bring us in. We're going to help you de-risk growth and maximize potential. So what are your best companies? What are the best deals where you see the most potential bring us in? And we're kind of a neutral party, half founder, half investor. And I can guarantee that whatever companies we step in, we're going to do whatever we can to get that founder or that founding team as far and as fast as they can. Because that's our true north is scaling impact. I'm so happy, Robin, that I reached out to you and said, shouldn't we bring someone from your network into the podcast and really dive deep?

1:01:55Because I've just been enjoying it for once, just sitting here, resting a bit and listening in. To Jerome and Robin, you have been able to see me all throughout. And you've also been able to see that I've had a dog that's not used to me working at this hour. So he was running around wanting to bark at the neighbors and stuff, which he never does normally. but Jerome and Robin to both of you thank you so much for coming on the podcast I just massively enjoyed it I'm sure our audience will as well thank you for having us Andreas and thanks Robin thank you so much yeah I thank the two of you thank you so much pleasure

1:02:44Acting, acting, acting, acting.