Joe Hyrkin on scaling Issuu to $30M, raising smart debt, and surviving as CEO

0:01What that means is as you take over and are running a company, the vast majority of the activity are things you don't understand. It becomes really important to make sure you've got a team in place that can grow and scale with you or that needs to be replaced as you're scaling and growing, where you can really work together. Welcome to the SaaS Revolution Show, a podcast by SaaS.com. Here we interview SaaS founders from around the world who've been there and done that. They share the ins and outs of how they built their businesses, their operations, their path for securing investment, and more.

0:36Our mission with the podcast is to help you, the founder, learn how to scale your SaaS, maintain your well-being, and navigate the complexities of this ever-changing industry. I'm your host, Alex Thumer, and together we'll explore the good, the bad, and the ugly in the journey to SaaS success. Okay, welcome back to the SaaS Revolution Show. I am your host, Alex Thumer, CEO and founder at SaaStock, also general partner at BackFuture Ventures. delighted to be joined today by joe herkin uh who is the ceo at care grip learning uh was also the ceo at issue uh which you may have heard of or used in the past uh really good see you joe thanks for coming on the podcast great to be with you alex thanks so much for having me yeah good to have you we we managed i managed to meet you in person first time you came over to sas.us in Austin in May.

1:30And so obviously, thanks for doing that. It was a great event. I really enjoyed the group that was there and the discussions. Yeah, it was a good vibe. I think there was a very nice crowd of founders. Austin does help, I think, as well. Although it was 105 degrees or something. It was. Do you know what? We pulled it. The first ever Sasquatch USA was end of May. and it was not as hot as it was then, but it was still hot, certainly for me as a Brit. And we did learn that it gets hotter and hotter in Austin and that pulling it back a little bit would be better. But actually we had this extremely hot weather, which being in the conference venue all day, I didn't notice until you step outside and then it just hits you like a ton of bricks, right?

2:22It kept everybody inside, Right. So it actually ended up being probably a better gathering. Exactly. Exactly. Maybe we should move it later in the summer then. Yeah. But good stuff. But and Joe, so we'd love to let the audience just know a little bit about you. So, you know, how how would you answer who is Joe Herkin? So I'm a CEO coach. I'm currently a dad of two boys and live in Palo Alto, grew up in New York, and been in the tech world for the last 30-odd years or so. Prior to kicking off my CEO coaching business, I was the CEO of Issue for just over 11 years. And Issue is this massive digital publishing platform that enables businesses, marketers, content creators to take their publications, marketing materials, catalogs, brochures, all of that kind of content that often they create using Adobe or Canva or Microsoft products.

3:21Issue provides a platform for hosting that content, transforming it into a whole range of additional digital assets. So you can have one brochure, turn it into articles, social posts, whatever content you need. and then get access to all the data analytics around that and how it's being consumed and distributed. So that company started in Denmark. I was brought in to run it in 2013, flipped it to be a U.S. company. We raised some additional money. We raised some debt, built the business to be nicely growing and profitable, and were acquired last summer by Bending Spoon. So quite an 11-year journey where it ended up being a really great outcome.

4:10I learned a ton along the way. I had teams in three different cities in Europe and in the U.S. and had over a million customers a year who used it, everybody from solopreneurs to big enterprises. We had both a self-service and an enterprise business and over 60 ,000 paying customers. So it turned into a really nice, one of these nice SaaS stories. Yeah, a pretty nice SaaS story. I mean, I was familiar with the product, and I think the acquirer of Bending Spoons, I don't want to say if they've been on a bit of a tear, but certainly they're well-known now in terms of being this company that is acquiring software businesses and apps and so on in the space, Italian founders, right?

5:01Yeah, they were sort of under the radar for a while. And they've been at this for over a decade. And they're really a holding company. They're not a PE firm. Essentially, what they're doing is looking for platform kinds of companies to acquire and then own and run for the foreseeable future. And I hadn't heard of them until they bought Evernote about maybe two and a half years ago. And when they did, I thought, oh, this is really an interesting company and I want to keep my eye on them. And, you know, since then, they've gone on to buy us and we transfer and meetup.com. And they actually just recently started exploring in the public markets.

5:47They took Brightcove from public to private. So it's there's certainly an interesting firm. And I actually have been really pleased with what's happened to issue since. They've actually taken our roadmap and implemented a number of the features that we were planning to. They've done some new things that we hadn't thought of. And they're continuing to make the tools and products available. You never know, like in a situation where a holding company or a PE firm is going to buy you, what's going to happen to the product and the business. And they put some real care into it, which I like. Awesome, awesome.

6:24And it was a pretty significant exit. I think it's public. I saw 100 million was the number, right? We like to say a nine-figure deal, yes. Yeah, yeah. So, you know, it was a good nine-figure exit. Everybody made money in the acquisition, good money. It ended up being a good outcome for everybody involved. All the employees got something from the transaction. Investors were happy. it worked out well for me, the leadership team, and I think our customers. Awesome. Maybe just thinking of the issue days, I don't know if you're able to share in terms of what the revenue was when you exited, or even just giving a range of how big the company was.

7:18Then also, if we go back to, you were there at the helm for 11 years, maybe some of the key things you did from, you know, strategy, growth, go to market, to grow the business, to get it to that point. So by the end, we were about 140 people, and our revenue was right around$30 million. We were profitable and growing. We're what I like to call a pro-grow. And we can talk more about that. And I think that aligns actually really nicely with your philosophy and a lot of the kinds of customers that are coming to your events as well. is for a number of years, as I would talk about the importance of profitability, there were a lot of people who rolled their eyes.

8:03There goes Hurkin again talking about being profitable. And then, of course, over the last couple of years, it's become very much in vogue to be profitable. And what I've always focused on is I've been in the tech space for close to 30 years, And I've always been a big believer in companies should be raising money for the purpose of building great products, getting them to market and then building a business. It's about great products delivering great value to a large set of customers who value it so much that they're willing to pay for it and put money into it. And as leading a business, I'm a believer in at least having choices.

8:47You want to have the choice of being profitable or not. so that you're not constantly in this cycle of having to focus on raising money, which then distracts from the ability to really build and create value. So we ran issue profitably from 2016 to 2020. Then we decided we needed to do some investing, both in the back end and innovation, AI, additional marketing capabilities, additional tools around integrations and enterprise. And so we then actually took on some debt for that. We raised money from VC originally. In 2020, we ended up taking on debt. It was relatively inexpensive at the time. And then used that to fuel the innovation and changes that we needed.

9:39And then got back to profitability. So we took it back to profitability twice. And that's always a sign that you're providing a product that people are finding valuable and building their own business around. What would you say around taking on debt? And you gave your own example. But for founders thinking about taking on debt, perhaps what are the considerations in your opinion of like things to think about when you should do it, when you shouldn't do it? Debt should be seen as a potential good tool. That's all it is, right? It's a good possibility. And I think you have to be in the right circumstances to benefit from debt.

10:25So debt can create significant problems and real challenges and add additional distractions to your business, or it can fuel things and help things move forward. in our case we took debt for a couple of reasons the first is we we did it in 21 and in 2021 there was this huge bubble of valuations and if you remember right and we were in the kind of position we we had uh we had good growth we were doing north of 20 million in revenue or maybe just shy of 20 million in revenue at the time. And if we had raised in that environment, we probably would have had to raise, you know, 20, 30, but people would have wanted to put tens of millions of dollars to work into issue, which would have increased preferences and would have given us actually an inflated valuation.

11:24So many companies at that time ended up with valuations that were really high and are crippling them right now because it limits their options, right? So there's nothing wrong with taking on additional investment, nothing wrong with any of these things, but you want to do it with some foresight around where this is really going. Are you really worth, you know, if you're doing 30, 40, 50 million dollars, are you really worth a billion dollars? You know, right now there's some AI companies that are for sure, but there were too many companies that took on too high valuations and we're seeing the results of that.

12:00Maybe we can talk about that a little bit later in the podcast too. So we had, we had options to take on debt and it was, you know, it's non-dilutive. And we were in a position where we were very close to coming back to profit, being profitable. So servicing the debt likely was not going to be a huge problem. And so we took that on. We ended up working with two lenders. The first lender we were working with ended up being really challenging. They created a lot of chaos in our business. And it turned out to be along the lines of a lot of the stories people hear about related to debt. So before it could get too bad, we refinanced them out of the deal.

12:54And we ended up landing with a lender called Eastward Capital. And Eastward Capital was incredible to work with. It was debt and we had to service the debt, but they were flexible when needed. They were really fast around getting back to us and communicating. And they felt in many cases like a partner in the process. And they were really great also when we were in the midst of the acquisition. So, you know, the reasons I just gave are important to look at as you're evaluating whether you want to take on debt. The big issue is remembering that lenders are in the business of lending money and making money on that.

13:33And one of the key ways built into their business plan is the expectation that you're going to miss covenants. So anybody that's taking on debt, needs to be really clear. What are the covenants? Covenants are typically requiring you to have a certain amount of money in the bank, hitting a certain amount of revenue every quarter or in some time frame. And most CEOs of tech companies are used to having clear budgets and having clear goals. But if you have a revenue goal in a particular quarter where you miss by a couple of percent, but you roll out product sooner or you hire a senior executive sooner.

14:17Generally, you feel like, wow, we're making progress. We're on the right path. Next quarter, we'll catch up. There's always that possibility. When you take on debt and you miss covenants, you're in breach. And if you miss covenants by$1.50, you're in breach. And most CEOs operate with the expectation that as long as it's pretty close, there's going to be ways to catch up. And we always expect there's going to be misses. Lenders expect there's going to be misses too. They just monetize them. And so that's the thing. Whatever the covenants are, you want to be able to look yourself in the mirror and say, yeah, I got these.

14:57We have a business model that gets there. I've talked to too many people who have called me up and said, hey, we're talking about debt and here's the covenants and I ask them how prepared are you to address them. And I often hear someone say, well, there's three covenants, two of them are in the bag and one of them were pretty close and we just have to do these three things to the product and like don't do the deal. Make sure you know how to address covenants. That is my number one thing. And then the second is if you ever do take on debt, make sure that you do sort of back channel references with people who have worked with that lender and it's gone south.

15:40Every, just like a VC, there's always a deal or two that doesn't work. And you can always see what they were because there's press releases and other things about them and call and find out because the lenders where things go south that work well with you, and there's plenty that do, those are the ones you want to be working with. I think the other thing to think about relating to debt is there is something like 400 or so alternative debt lenders in the tech world. And each of them have their lane. So you think you can talk to anybody, but it's not true. Like, you know, there's some that only go up to 5 million in debt.

16:19There's some that only start at 50. There's some that only focus on enterprise deals. There's some that understand SaaS. There's some that are catering to, depending on where your market is. So you want to understand who really the opportunities are. And like many things, there's 400, but probably only 20 that are appropriate for your stage and your particular situation. Awesome. Lots of great advice there. And thanks for sharing that. Yeah, definitely. Well, I would say a couple of years ago, we saw probably going back to 2022, like a ton of revenue based financing providers that come out in the SaaS space.

17:04seems to have dissipated a little bit to fewer suppliers around that, I guess perhaps sort of tied into what's going on in the economy during that time and interest rates perhaps as well. Well, I think interest rates fueled it. And then I think then people got into the game and realized that the expected – So lenders then realized that the revenue wasn't necessarily good. The growth that we had seen in, you know, between February 2nd and 8th, 2022 was not sustainable over the next three years. Right. And and I think CEOs recognize that, too. And so that, you know, those markets, I mean, sort of like the SPAC market, you know, like like the alternative markets, The alternative opportunities, to me, often seem to start with a good idea because it's unique to a particular set of situations.

18:05And then a range of others jump in and it doesn't necessarily scale. The whole idea of SPACs didn't scale. There were some that were successful. There were many that weren't. I think it's the same on different forms of lending. I want to go to your 11-year tenure and just thinking about leadership and longevity. Because being a CEO is very hard, right? I mean, I think sometimes I sort of reflect and generally because I interact with mostly CEOs of SaaS companies. But you're a CEO too. You see it all the time. Exactly. So from my perspective, and we have CEO conversations, set-level conversations, and often it's said, oh, it's the hardest job in the world.

18:54It's the loneliest job in the world. And I think a lot of these things are true. And then sometimes I say to myself, well, look, I also appreciate that within my team, like everybody, the marketing director job is very hard. And the sales director job is very hard. And is my job much harder than everybody else's? I think perhaps in many cases. We like to think so. Look at me. But perhaps I think it is because, you know, across the whole business and, you know, working across all the functions. But you were there for 11 years, you know, through to the exit. Like, how did you evolve to stay effective, like, throughout that?

19:36Because, again, it's, you know, it is a bit of a roller coaster. It's not easy. and it's not easy to be a CEO for 11 years at one particular company? First off, I think in the tech world, being a CEO absolutely is super challenging. It is not the hardest job in the world. There are way more challenging jobs and situations. And so I just think that's something to think about. And frankly, some of that helps as a CEO to put the challenges we have in context. There are a lot of other people in this world who are in the midst of dealing with many more and more immediate challenges. In terms of longevity and being able to continue doing this, one of the things I'm most proud of at Issue is over the 11 years that I was there, we grew every single year.

20:33We never had a year where we had a down year. It wasn't always as good as we wanted, but we always grew. And so I think one piece is, again, this notion that we talked about earlier about ProGrow is that we're here to grow a business. And we're here to provide a service and products to customers where it really matters. So for me, one of the things that's really important is anytime there were challenges during my 11 years, I would go talk to customers. So when I was most frustrated internally where a product wasn't getting rolled out or we had made a big mistake or things weren't growing as quickly as needed, I would get on a Zoom or I would go get on a plane or my car and go meet with the folks who used our stuff.

21:25and even the ones who complained and were frustrated at least they cared and it would remind me over and over and over again the the the value and the reason why we're doing what we do I know I would remind the team that we would start our we had a company meeting every month and we would start our company meetings almost everyone and often end them with customer stories So we would kick them off with a short video, three to five minutes of interviews with our customers. Not all, not always the good stuff, you know, a combination of things. And we would end with our customer success team sharing some of the discussions they had just been having with customers.

22:12So for me, part of it is making sure that we constantly come back to that. And that always gave me a tremendous amount of energy because it reminded me of what we were doing. That was one of them. The second thing is, as a CEO, I learned a lot. I mean, a week never went by. Rarely did a day go by where I wasn't learning something. And, you know, there were times I was like, OK, I'm good. I don't want to learn today. but to be successful and have longevity requires a ceo to be in a space of being open to learning all the time we're learning about our customers we're learning about new business models we're learning about engaging and interacting with people uh we're we're going from you know wow we have 30 people i'm really good at managing 30 people and all of a sudden now you got to grow it to 50 and 75 and 150, you know, like we're constantly in the midst of challenges.

23:18And to be successful requires both an openness to learning and then applying that learning and a responsiveness. So we have to move away from being just simply reactive to the challenges and start to use all the information that becomes available to make decisions. Another key component is the team. At the end of the day, yes, part of the reason it's hard being a CEO is because we're in a position to make calls all the time, and often making calls without full information and without fully understanding the implications. Every CEO has some level of specialty, even if they haven't worked in an organization before.

24:09If they're a brand new CEO fresh out of school or skipped school, they have a particular specialty. Maybe they know how to code or they've sold something or some area. And so what that means is as you take over and are running a company, the vast majority of the activity are things you don't understand. Yeah. So the it becomes really important to make sure you've got a team in place that can grow and scale with you or that needs to be replaced as you're scaling and growing. And that where you can really work together and you can respect. By the way, it also helps to be in a good market. You know, like all of this stuff, all the advice and all the books and all the everything related to being a CEO and a leader.

24:58if you're in a bad market, you learn more. But, you know, there's plenty of examples where someone's been in an amazing market and things take off and you look around like, how'd that happen? All of that resonates, I mean, without repeating everything you said, but just maybe even just touching on the first point and the last point, you know, I have my good days and bad days, right? It's natural. Hopefully there's more good than bad, right? And I think that is the case. But when you're, in my scenario, like when I'm meeting the customers who are the SaaS founders, when I'm together with them, that is a reminder of this is why I'm doing what I'm doing and a reminder of actually, you know, often I feel I've got the best job in the world, right?

25:49Yeah, yeah. You know, in March, I was in Barcelona with 40 SaaS founders that I took them there for the weekend. I was like, this is my job. I can't believe it's my job. Right. Right. And it's so amazing to be able to do that. And that's a reminder. But when you're home and you're organizing and trying to find someone's phone number or trying to figure out, you know, wow, I thought I had this amazing speaker lined up to talk to these 40 people. And at the last minute, that speaker gets sick and you're like, I got to go. Those things, there's so many of those moments, right, that nobody, most people don't necessarily see, it makes those, I'm sure it makes that time with those 40 founders for you that much more enlivening and enriching.

26:35Yeah, 100%. So at the moment, Joe, so you're a CEO coach, are you coaching SaaS founders? Is it specifically or? I'm basically coaching tech or VC backed founders and CEOs of companies anywhere from early stage through to pre-IPO. And my real focus is, you know, it's got to be a CEO with a business that has a real product, product market fit. And one of the things that I focus around my coaching are the kinds of areas that I learned from the most as I was running and growing a business. And so often founders and CEOs of tech companies are told your number one job is to have money in the bank. And I actually think the number one job is to minimize distractions for themselves and their team.

27:32By the way, running out of money is a distraction. If you're spending all your time raising, you're not focused on the things that matter. So I work with CEOs around a framework of starting to identify which of the distractions that are coming up are the ones that align with the key goals. So we put a goal and focus framework together and then use that framework to align everybody from the board to the management team to the rest of the company around how we're executing. I'll give you a quick example. Often, one of my clients, and I see this often, a board member will use the product and say, oh, there's a bug.

28:13And then the VP of engineering feels like the board member is saying there's a bug and everyone jumps on it. And then you lose two weeks of what you were delivering around the particular goals of the business and then you miss your goals. It's not to say you shouldn't fix bugs, but some bugs you really need to address immediately. Some go into a queue, but there's often not a definition. It often ends up being too subjective. And I work with folks to get them around this more objective evaluation approach to minimize distractions and executing. The second piece is, actually, I call my business Care Grit Learning.

28:51And these are three values that we used a lot, leveraged a lot at issue. And it's ones that I think all CEOs need to be working with and that I really coach through in my work. You know, care is about caring for our customers, caring for how their customers benefit from using our product, caring for the employees that we have, recognizing that when we're asking employees to work hard, it impacts their families. So there's a care there. So it's a care across all aspects of the business, the organization, and particularly for the human beings and their interaction with us. either internally or externally.

29:29Grit is, particularly for a CEO, it manifests in a range of different ways. Obviously, you want people on your team that have grit, that can identify challenges and come up with solutions. And one of the core qualities is synthesis. Can you bring on people in your team who don't just identify the challenges, but start to synthesize, here's the solution and here's why. Here's how that solution aligns with the goals that we have in a year. Here's the types of things. More people who synthesize in an organization, that's one of the compounding effects of success and growth. The other thing that I find, particularly in founders, is they will accept too much dumped in their lap.

30:18So they'll have someone on their team who says, oh, there's a problem, and the founder jumps in to go solve it. What you want to do as a founder is to nurture that grit in the team. And too many founders give other people on their team reason to not think through a challenge. Because they're like, oh, I'll just do it myself. I know more or whatever. And then you can't scale. And then on the learning stuff, we talked about this earlier as well. It's like, it's not just about learning. It's about how do you apply that learning? How do you really take the experiences that have been most challenging and learn from them?

30:59You know, COVID is a great example. We all jumped in the middle of March of 2020. Nobody had managed through a pandemic before. Many people were in the midst of crisis. Many businesses were in the midst of crisis. And then slowly, we sort of pulled out of it. And one of the things is, while we had never managed through a pandemic before, we all had experiences of resiliency. And those people that through their career have recognized resiliency, like resiliency happens, it happens to all of us, it's almost a birthright. You know, you come out of the womb, you've never eaten before, and you figure that out.