#2276 Close: The $50 Million / Year CRM

0:09Hey there, Freedom Fighters. My name is Andrew Warner. I'm the founder of Mixergy where I interview tech company you would never sell. And this guy comes walting onto the stage and he goes, not only will you sell, you're going to want to outsource your sales to my company and businesses that we know of were outsourcing their sales to him. Then he got really good at it and he said, you know, there needs to be better software, CRM, to enable this type of process. And then he went out and created it. And that software is called Close. We are doing a follow-up conversation and there are a few things that I want to cover here today.

0:42First, now that we're no longer trying to be persuaded to sell. He's a guy who's seen people sell so many times on his platform. We're all eager to find out what's working that would give us an edge in selling human to human selling, not human to web page buying. The second thing I want to find out about is how he made the switch from services to sales when so many people who are in the service business just get so stuck down in that. And then there's one problematic thing that I don't know how to talk about when that is that his competitors, two of them specifically are way bigger than him. I don't know how he's going to catch up.

1:15And it feels a little disheartening to know that we're in a world where the giants are much harder to take down right now. And maybe he doesn't need to take them down, but I still feel disheartened. We'll talk about that. And of course, we'll talk about AI and how AI is going to impact sales. Steli, you know, the first thing I'm going to ask you, what's your revenue right now? You guys have really grown a lot. Yeah. As you were just saying, you know, the first thing I'm going to ask you, I was like, what was the first thing you would always ask? And now I'm like, oh, yes, yes, I remember. People, founders would shake in their boots like everybody was nervous to talk to you.

1:48What a great throwback. So for us, we just surpassed$45 million in revenue. So we're probably going to end the year at the$50 million mark plus in terms of revenue. Dude, the other thing that I remember about you was at some point you raised money, but you said, we do not think like a venture-funded company. We want to make a profit. I wonder if that attitude helped or hurt you. There's a period there where I thought maybe your pride in that was keeping you from spending money that would allow you to grow. What happened with that? So we actually raised a tiny angel around when we were doing something completely different.

2:26And then we wanted to raise more money when we pivoted to Elastic Doubt, so sales as a service agency. And then when we pivoted to clothes and nobody wanted to give us money. Nobody wanted to compete with the big boys in the space. And so we became profitable. We decided to be profitable. And that experience actually made us go, we don't want to have to ever go through this again. Let's not rely on other people giving us money so we can exist and survive. Let's actually just be profitable, right? And then be in control of our own destiny. So we've been growing profitably for over a decade now.

3:01We never went back out. It's funny. When you don't want money, they are throwing themselves at you. There's not a day where I don't get, you know, 20, 30 emails from VCs and private equity firms. And they're getting more and more creative in how they're trying to get in front of us. But I do think that it helped us be more focused. That restraint helped us be more creative. It made certain decisions easier. And in hindsight, for us, it helped us. Because we knew we won't out-fundraise the big boys. We won't out-spend them. So we have to be smarter, more focused. We have to hire people that are more exceptional in terms of their talent.

3:43And I think it ended up helping us sort of survive in a space where most competitors, new CRMs, could not. Or they would all hit a ceiling at the 10, 15, 20 million mark and then sort of slowly decline. I saw many new CRM entries go that path. Give me an example of someone like that who, because they didn't have your bootstrapping, got to make a profit. It's got to be hustling mode when out of business. I will, but give me one second. My mom is visiting. She just entered the room. He has contacted us from Greece. Yeah. She needs an item for the dog because somebody has to pick up a dog. Take care of it.

4:22I'll be right here. It's upstairs in the kitchen. A pano sti guzina. Ki puine ta skilja, ta pramata. Tu se kitha dodis. My mom was like, oh my God, he's bringing me up on this podcast. Yeah, she's like died a thousand deaths for a second. All right, coming back to your question. Yeah, I want something. Right now it feels a little generic. Tell me. Yeah, so I don't want to name a name because they are still in business. So I don't want to throw shade into it. Don't mention them, but talk about them. I want to see a specific thing that they did or that they couldn't do that you did because we out-competed them.

4:59We hired better people. It feels a little generic, but I know that there's something specific. So I'll give you something very specific. You know, there's a company out there. They raised over$100 million, right, over the years. And at first, what were they focused on? They were focused on small and medium-sized businesses. And they actually focused on a specific platform to be really tightly integrated with. And so they got a lot of traction in the SMB space. Their product felt very native to that very big platform that would bring them a lot of small businesses. I think they were doing really, really well.

5:28But as they were raising more and more money, you get more pressure to drive more revenue, more growth. And in the S &B space, one of the problems is you deal with a lot of churn, with small accounts, very hard to grow at a certain degree. You know what brings great big growth is bigger accounts, enterprise-level deals. Also, you can hire lots of salespeople and force function that growth, right, ahead of where your product is. You don't have to be patient like a MailChimp or like us where it takes many, many, many, many years. You can just like hire a ton of sales reps and go out to bring in some big deals and your revenue can make massive jumps.

6:05And that's what they did. And so as they forced their way, as they got forced to hire some enterprise level executives, build a big sales team, bring in larger clients, what ended up happening is they for short term maybe for two three years they did sharpen their growth curve but all of a sudden the product got you know more more diluted people in the company were less and less aligned because the the early people that really loved the product and the focus didn't didn't love now getting sort of big lists of random features to close a big enterprise account and just hurry and build it and we don't care how it works if it works really well.

6:46We just need the feature to be done so we can close this big account. And so it creates all kinds of misalignment in the company. There's no more focus because the company was saying, well, we want to serve the small ones, but also the biggest ones out there. And so it just waters down the product. It waters down the focus, then it becomes less differentiated. And then as a company, employees, all that, you just start becoming more, they started becoming more average, more, less focused, less sort of standing out in a specific niche. And as far as I can tell and hear about, they struggle now. Although they had gone to sort of 20, 30 million revenue, they've declined back to 20.

7:28That's always really painful to do, especially when you raised 100 million. And now they're in sort of this space of trying to sell, but they're not as hot anymore. And it's just not clear what's going to happen with that company. And I do think they had a great start, but they sort of went down the typical, we raised a shit ton of money. So let's go in and go and get bigger and bigger customers. And so they lost their focus. Okay. So then on the other side, you've got people who did break free. Like they raised a bunch of money. They actually are big now. And I find that a lot of them are overly clunky because they put too much into their tool.

8:08And so, yes, they're serving enterprise. Yes, they're going after startups. Yes, they're going after everything in between. And the reason they're succeeding is because they gobbled up all the integrations. And so you sign up for something like Grain, which is a note-taking app, and suddenly it says, do you want to send this over to one of these big CRMs? You sign up for Granola. Same thing. And now for someone like you, I don't see clothes being integrated. I don't see clothes being essentially promoted by all these tools. how do you survive in a world where they're that far ahead? Well, one, you have to be exceptional in certain things that matter deeply to a certain amount of customers out there, right?

8:49If you're just like as good as them, but maybe slightly nicer in an area, if you have some nice to halves, but you don't have a killer feature or you're not significantly better at certain things that people really care about, you're not going to last. Like you need to have customers. I'll give you an example. Our biggest customer is, I don't know, maybe like close to a thousand sales reps on close, right? They're paying us millions. They're big. They've grown quite to a large, large company. That's not how they started with us. They started very small, right? They started with like 10, 15 reps.

9:20Most customers that start that small will not grow to that size and still be our clients, right? Many do, but most won't. Here's why they have to go through a lot of pain of staying a close customer, dealing with all kinds of features we don't have, in all kinds of difficult workarounds. But the reason why they do is because the productivity gain we give to each rep is so high that to them it's worth the pain of all the enterprise-level features we're lacking. Now, that's not going to be true for all big clients, obviously, right? But you need to have some of these things that are so much better that the things you're lacking, customers will work around.

10:01They'll eat that little pain to get that benefit. And the thing that makes you so unique is, I don't know if you still say zero data entry or zero manual entry, but the thing you do is you say, I don't want salespeople to enter any data. By removing that, everything gets cleaner in the database, and then also they're more productive. And that's the thing that you focus on. I think that's a secondary effect of what we focus on. I think the starting point where we were different from everybody else was, and still are, is that we said, if CRM is sales software, sales at its core is result-driven communication.

10:35So it has to be communication software. So we were the first to do VoIP calling out of the box so you could make calls and receive calls in your CRM. We're the first to do two-way email sync. Now it seems so banal, but like back then, you had to forward email threads to your CRM and it showed up in some like PDF attachment or something. It was terrible. So we did a lot of communication things first and we are still today the best CRM. If you communicate a lot and deeply with your customers, close is the best tool for them, the best CRM for that. Now, with AI, we're going to be able to really deliver fully on the promise that you mentioned, which is that we just want you to focus on building relationship, talking to your prospects and customers, coming up with solutions, negotiating with them, and then all the manual data entry, all the follow-up work, all the data work should be done by your CRM for you.

11:25So you don't do your customer relationship management in close. Customer relationship management happens by close. The software does that, the management piece for you, and you just do the communication relationship building. I get that. And really, I do use grain and I use granola and I'm sure I use others. The thing that I like about grain is at the end of a sales call, it gives me analysis on my sales. And I love that kind of thing. As an avid chess player, I don't think I go a single day without playing multiple games of chess. One of the things that I love about chess.com is at the end of a game, it analyzes every move and it tells me what I could have done.

11:58And you start getting the same feedback multiple times and you realize, okay, I'm not going to make this stupid move again. And the same thing happens there. But I realize Gray knows that I lost the sale. It tells me what I could have done to get the sale, push a little bit harder, and what I could have done to maybe follow up. Make sure to schedule a follow-up call on the initial call instead of letting it go. And I just have to think, if only it was a CRM, it would be able to move that card over on the Kanban board for me. because if I'm happy, I want to go and service, like follow up with the customer.

12:31If I'm disappointed, I want to think about it. I don't want to go back in and move a card. I always forget. So I get where you're going with that. All right, the big takeaway though is look, if there's a lot of competition, you have to say, what is it that I'm focused on and just be there? And for you, it was this SMB market. It wasn't enterprise, even though enterprise is easier to get and the churn is less dramatic. But how do you resist it? How do you not say, you know, I'm competing here in a world where I could see these people are getting really big. I should change. I should go after maybe not enterprise, but let's call it enterprise-y, these little companies that feel bigger.

13:09What happened? I think we had a huge benefit in the amount of experience we've had as founders to then truly understand how confident you need to be in understanding who you are and who you aren't. we knew when we launched close we are not interested in enterprise sales we're not interested in that kind of a customer we're not passionate about them we're not knowledgeable we don't have any edge in that space and so we're just going to say no to that money because there's other money to be had right and i think that oftentimes especially in the early days as founders um we are very insecure we we want great success and we project confidence but we actually deep down pretty insecure about like constant full of doubt this is the right thing are we missing out?

13:53Am I making a mistake? Am I making a mistake is the background soundtrack day in, day out, right? Like, am I making a mistake right now? And so when opportunity comes to founders, oftentimes they're very easy to change their mind or to sway them in a different direction. Just because some VC emailed you and saying, oh, if you guys focused on mobile, I think we would invest. All of a sudden you change all your plans or a big customer comes to you and says, we would buy this and we would be worth many millions. And wouldn't it change your life if, you know, Coca-Cola or whatever it is, you know, Procter & Gamble or Chase Bank was your client.

14:26And the founder, because they're afraid, what if we make a mistake and, oh my God, maybe this would be the big thing, the big breakthrough. Right. And just change the direction, change their plan. And they don't honestly calculate, can we truly win here? Do we believe that we can really nail this, that we understand this customer better than anybody else? And this really aligns with our strengths and our direction. And so too many times we make these little compromises because we're not confident enough in knowing who we are and who we aren't. And confidence really is manifested to how many good things you say no to.

15:02Are you really confident enough to reject ideas, reject business, and say no to things? Well, let's look at a counter example. HubSpot, another CRM, really big. They say yes to everything, right? They will do websites. They will do email marketing. They will do your Calendly. They will do everything. And they've done really well. Maybe the counterexample shows that if you would have made the leap, you would have been okay. Maybe you would have died like this other company that you mentioned, but maybe you could have made the leap to there. Maybe, but maybe not. So I'm not convinced. I do believe that there's counterexamples to what I just said.

15:40but a lot of times when I look under the hood, even when the counter examples, even in those companies that do sort of everything for everybody, like even Monday to Come is a great example of like project management, but it can do anything and it's everything for everyone. Even in those when I look under the hood to understand a little bit better the story, I do find great focus in the early days and saying no to a lot of things. HubSpot is a great example. When they went into marketing tech, they focused on inbound marketing and specifically organic SEO and content, right? And that was a tiny market when they first started, but they really got great at it and they really sort of collected an incredible amount of search volume.

16:18They didn't build a sales team. They didn't build a massive ecosystem like Salesforce did from day one to sort of go enterprise. They stayed small and mid-market and they focused on one motion above all others, which was content, organic search, content, organic search. And then when they decided to go after Salesforce, again, they didn't hire a massive sales organization at step one. They just shifted their superpower, which was content. And for two years before launching a CRM, they just flooded the world with incredible amounts of sales content to capture all that traffic and all that demand.

16:50And then they launched a free tool first, which is a little email notification tool. I don't remember what it was called, but it was great to notify you when some lead in your Salesforce instance was looking at your blog post or something, right? Like to know the right timing. And it was a free tool, a Chrome extension, a Google extension, and they got like hundreds and hundreds of thousands of sales reps to download that and use it. And then they launched this CRM. So still I feel like they used their strength and they had one big focus as a through line. Today, as they scaled and it became bigger and bigger, they eventually went down like, let's just become Salesforce number two.

17:26So they're doing a lot more things than Salesforce was doing. And that's also the direction that a lot of other things are taking in their company and product. But when they started, they were pretty focused on like one channel that they really dominated. All right. That does make sense. And I do. The thing that's disheartening for me here doing these interviews now so many years later is I do feel like there is like the click up effect. company raises a ton of money, then does every single thing, crowd out the space. And it's, it's not even an exciting story. It's not exciting, like the way that the base camp story is exciting and that you can see a few people with an idea and the creativity to come up with a way to get customers and a new way to think about something that had been solved before.

18:13And so I don't want to interview the founders of ClickUp. I honestly don't even know their names, There's nothing against them, but I don't aspire to be like them. I don't aspire to have their lives. I don't get curious about them, but I also have to accept ClickUp took up a massive amount of mind share. They do have a lot of users, and that's the part that's disheartening. And I don't want to see companies like Close get drowned out by that, and I don't want to interview the future of tech and the future of startups if it's all the next ClickUp. What do you see? Yeah, I hear you. I don't see it that way.

18:45The way that I look at things is there's founders and companies I love and I get inspiration from and I'm curious about and I want to know the stories. And there's companies where I clearly go, you know, great job. You know, I applaud silently in my mind. Wow, great job. But I would never do this and I don't want to live this life. I don't want to run a company like that. And this is not inspiring to me, but I see why it worked. And I think the trend has always been, and to some degree, I assume it will continue to be for a long time, of this sort of like people want products that are really, really great at solving a certain problem.

19:26And then there's too many products because there's too many problems. And then customers will go, I just want one thing that does it all, even if it does it a little less brilliantly because I can't handle having 20 different products to solve this. And so the pendulum just swings back and forth between what is getting a lot of heat and what is getting a lot of attention, where the desire and hunger is from customers. And over time, I think that a ClickUp and even a Monday to come, they came in a time where they started growing in a time where the ethos in software was do one thing, do it really great.

20:02Only the sales forces and the very big enterprise tech can afford to have a shitty product that does it all. but let's just and then they went no let's just do it all then like what if we just try to give the promise that we'll deliver to a non-technical business owner is you can buy one thing and it will do your project management your accounting your this your that your everything and so we give them that peace of mind of thinking I just have to buy one thing and I won't have to worry about this anymore it's just too compelling of a promise to not keep coming back you know and attracting a lot of customers but I agree with you.

20:38Is it really what I aspire to do? I see this story all the time of some person that came up with some fad idea and sold a million tokens of something and made a ton of money and then it all collapses. And I always go, wow, what a wild story, but I don't want that. But also I can't. It's not in me. I'm just not wired this way. I want to do something I really enjoy and I believe in and that is fundamentally good in my own estimation. And there's going to be a market for that forever. And there's going to be a market for people that do the exact opposite of what I do and still succeed with it, at least for the short term.

21:15Okay. I like the framing. You're saying, look, Andrew, we've got two different types of companies. And the way that you did it is the way that you broke them up is the I do everything versus I do one thing. And the I do everything is multiple CRMs that also include like a calendar booking service and a website, right? Versus Calendly that just does this one thing and focuses on that or close that says we're just here to help you close sales. We're not here to also do your marketing and all that. And that's actually really a good way to think about it because on the we just do one thing really well.

21:50I think there's incredible opportunity for that hustler mode entrepreneur to come in and do the one thing. And then later, if they decide that she wants to go off and do everything, there's an opportunity to do it. But at least you do the one thing really well. And that brings me then to AI, where you have a few players who are like OpenAI with ChatGPT who can do everything. They can be your therapist and they could be your writing partner and so on. But you're right. I've been trying ChatGPT for a journaling app and it's really good, but it's not as good as a really good standalone journaling app.

22:24And it's not as good for other things. I can't think of them right now, to be honest with you. Oh, I know what it is. For like sales. For sales follow-up, it's not as good for me to take all of my stuff, all my transcripts and say, now give me feedback on it. I actually do really prefer grain, which is good for that. So that's an interesting model. So then let's talk about you adding AI to close. How do you do it without infinite resources and without ending up being the everything app? Yeah, I think I'm more excited than ever about AI. I know that a lot of people are, but also I know a lot of founders, especially the founders that are sort of more bootstrapped.

23:04They're really scared about, hey, will there be space for small players? What if just like one app does it all? A friend of mine is like a total maximalist. He's like, there's only going to be a text box that exists in the future, and it will do everything. You're just going to say, build me Microsoft, and it's just going to do every product under the sun for you. I don't quite buy that world. And so in my mind, if you give everybody a superpower like AI, now our software can be smarter, can do more, can take more actions, can be more powerful, and we can move much faster in building things. and the value of building things or building features or adding pixels is going down as the ability to do that is exploding.

23:53To me, this is an exciting opportunity because now, again, your level of taste, your level of creativity, your point of view now are amplified in a sea of people that when everybody can do something, everybody will do the same thing enabled by AI. And so there's always going to be value when you zig when everybody else zags. That's going to grab attention. As long as humans are part of the economic world, that's always going to be great. And for us, what that means is, just one example, a lot of companies are going to be focused on the outbound motion and helping sort of you have a virtual SDR that spams people around the world nonstop to get you some appointment.

24:33And we go, well, that's not really the world we want to build. Also, I believe that if you give everybody infinite AI, SDRs, we're going to build a counterreaction to that, right? Like I cannot get infinite calls and emails every single second, right? That will break me. So then there's going to be services that stop that from happening or protect me from that. So instead of going cat and mouse and instead of doing all that, what we do is we focus on the inbound motion. Never again will you have a missed call. Never again will you have a missed or forgotten opportunity or email. Well, never again will happen that the people that showed an interest to you today or 10 years ago go cold and forgotten because you're just a small team of four or five people.