Recall Sessions: Building a $1.1B Category That Didn't Exist | Nick Mehta (Gainsight)

0:00Mark Benioff came up with the term customer success and had the first CSMs. However, when we started, a thousand CSMs in the world, people in the role. Fast forward, you know, 10 years later, there's 300 ,000. By the way, at some point, this is how crazy we were. At some point we made like a music video trying to win Box. There's a song from the 90s called What If God Was One of Us. You might remember because you're right. We made What If Box Was One of Us. Wow. It was so bad. And so I decided to get up on stage, like just coming off pneumonia and literally talk about being lonely as a kid, which I was extremely lonely as a kid.

0:36What that does, even to this day of not feeling like people really want me here or not, that started this thing that became like Gainsight is this vulnerable company. So the founder has a chance to not only define the words, but make them real.

0:54I'm Sharma Nyogi, and I'm guest hosting a new series for the Village Global podcast called Recall Sessions. Everyone talks about product, but I want to talk about something that doesn't get enough attention, go-to-market. Specifically, how do the world's most successful companies get their first customers? I'll be sitting down with founders of billion-dollar companies to hear the real story. Not the polished version where everything just clicked, the messy version, the cold emails, the first deals, the selling before the product was even ready. My guest today is Nick Menta, former CEO of Gainsight.

1:23Gainsight is the platform that helps companies drive durable growth through customer-led and product-led strategies. Vista Equity Partners acquired them for$1.1 billion. Nick ran Gainsight as CEO for 13 years before stepping into a board role last year. He didn't just build a company, he built a category. When Gainsight started in 2013, there were just maybe a thousand customer success managers in the world. Now there are hundreds of thousands. He's co-authored four books on the topic, been named Entrepreneur of the Year for Northern California, and currently sits on the boards of F5 and Pubmatic.

1:53We're going to go back to the early days before Gainsight became Gainsight. Let's get into it. Nick, I've been wanting to do this since I've met you. You're just an incredible person that has created an incredible company that everyone knows about in the customer success category, which is Gainsight. I appreciate you being here. It's awesome to be here. And I genuinely mean you're one of the most gracious people I've ever met. So I'm happy to do this. Thank you so much. So I really, really wanted to spend some time talking about the early days. I mean, everybody knows what Gainsight is today, the brand, the customer success category.

2:25But I don't think we've ever really kind of unpacked some of the early days. And I know that you and I met in Mountain View. Yeah, I remember that. There was a - Red Rock Coffee. Red Rock, yeah, Red Rock Coffee, right? So for folks that live in Mountain View, you know, we're referring to. Still there, right? Mountain View is still there, I think. I don't know if Fred Rock's there or not. Let's assume it's Fred Rock there. We'll see if it's there. Let's talk about the early days. Tell us about how you got involved in Gainsight. It's probably an interesting story. Maybe you can start there. Yeah, totally.

2:53So I'd run another SaaS company before Gainsight. We sold it. I was doing an entrepreneur residence at a venture firm, Excel Venture Partners. Entrepreneur residence, for folks that don't know, is a completely made-up job, only in Silicon Valley. Sounds pretty made-up. It's completely made-up. But you basically hang out with VCs, trying to figure out what you want to do next in your life. And one of the problems we had at my last company, which was a SaaS company, was churn, retention, just literally knowing what our customers were doing. And I was shocked that we were sitting in the cloud with our software and we had no idea.

3:24And so I was thinking about, I'd written up this sort of rough set of bullet points of what a product might look like. And then random serendipity, a friend of mine who's another investor at Battery Ventures, called me and said, hey, I just met these two founders. And they're working on this business, working on this idea to basically help reduce churn and improve adoption and renewal and all that in SaaS companies. I was like, oh my gosh, that's exactly what I've been thinking about. And so we met up. There's two guys, Jim Eberlin, Shreether Pettinetti. They had a very, very early mock-up of a product, some early customer interest, but pre-revenue and things like that.

3:59And that was in February 2013, which is, for people watching now, that's like about 5 ,000 years ago, probably in AI time. Yeah, exactly. Was customer success, was that even a role? Or like, tell me about the state of like, were people, like, who was responsible for churn? See, that's the thing. People knew that, okay, if you have a recurring revenue business of subscription, today consumption type business, you need to keep your customers. That's kind of like Captain Obvious, right? But who is responsible for that? In older businesses, customers were kind of stuck. So nobody needed to be responsible, right?

4:34There's companies like Oracle, SAP in the old, kind of the 90s. Great companies. they would sell the software and then the salesperson would sell it. And then you'd call them if it broke. Otherwise, you're on your own, right? And then, but what happened was when SaaS was pioneered largely by Mark Benioff at Salesforce, you know, this business model changed where the customer every year could decide, do we want to stay or go? And we'll talk more about this later, but this is so much a bigger deal now with AI, right? Where the like barriers to entry and exit are gone. And so there's no modes. And so Salesforce had to figure this out.

5:05And in the early days, you know, they weren't the company there now and they needed people to make sure people were adopting the software, they were using it well, and they stayed. Mark Benioff came up with the term customer success and had the first CSMs. However, when we started, there was probably, actually we did the count, a thousand CSMs in the world, people in the role, which by the way, like is a terrible TAM to sell into if your software is a few thousand dollars a year. I mean, I had like a$2 million TAM, but then, And fast forward 10 years later, there's 300 ,000, right? Because we knew that eventually everyone would need this type of role.

5:39And certainly that's one of the cool things is it actually happened. When you met with Jim and Shredder, was there just like love at first sight? Or I mean, obviously you had interest in the same category and you were feeling it. But like, how was that journey like? You know, it was like founder dating. Yeah, that's what it was. How long was that dating process? It wasn't that long, honestly, because I think I was so passionate about the idea. and they're like the most humble people ever. And they're just great humans. And so it was just like, yeah, this is a no brainer. So it was literally maybe a week or two.

6:10You had slides, you had slides only. It was like, was that - Slides, no, they'd built like a mock-up kind of product that was originally on force.com, which you would remember, Salesforce application development platform. Very different from what Gainsight is today. But yeah, there was that. Those are the two things that they had, but there was interest from customers. Did you already have, like at the time you kind of started going on dates, was there already customers already kind of lined up? They said, we want this or where was it? They were like more like, we'd like to try this. Yeah. You know how like any startup is early on, right?

6:41Where people are like, we'll try this. And, you know, of course they were like the investor portfolio company companies and all that, right? So that was that level, which is where you start. And for the first few months, that's kind of all we did was sell to our friends and sell to our investors' friends and portcats. And did people just like pick it up and say, oh, maybe you can talk about what the first version of the product was. and like what was the thing that sort of drew people to be like, hey, I'm willing to give it a try? Well, I think the interesting thing, because this will tie to category creation is, I'll talk about the product in a second, but the first version was really more about the community and the people.

7:14So what happened was in February 2013, you know, we got started. In March 2013, we had this office in Mountain View, California, the one you're right across from Red River. I was on the second floor. I was above a bar, if you remember, there's a bar in the corner, right? The carpet's peeling off the floor. The bathrooms are kind of gross. It was like not a nice office. But we're like, hey, there's this new role that's starting to emerge, customer success manager. It's at Salesforce. It's a few other companies. We're like, what if we threw like a meetup to see if people want to like meet each other?

7:46Forget about us, right? Because eventually we don't sell them software. And so we organized this meetup. You know, we were in California. So we went to Safeway, which is a local grocery store. I got like the cheapest wine, the cheapest, like that cheese tray that really shouldn't stay out more than a couple hours. Yeah, we've always had that. Put it on this ping pong table, because we didn't have a conference. We just had a ping pong table. And we put them on there, and then we send a meet up, invite up. We all thought we'd get 30 people. There were 75 people in the office till 10 p.m. And they weren't there because of us.

8:17They were there because of them, because of each other. And we were like, God, this is a community that is a new role trying to figure out like, what's my job? You know, we've all been in situations where you're like, whether it's personal or work, like you're trying to find people like you, right? That's what community is. Find people like you, right? So I'm less alone. Know that I'm on the right path. And these people came to this like crappy little meetup, not for the wine or cheese, for each other. And so we figured out, gosh, like the opportunity here is to be the company that builds the CS community, defines the role, helps figure out the best practices, and then builds of software, right?

8:54And the software just is a manifestation of what we learn from the community. And so we can talk a lot more about it. That turned into our big conference, which started with 300 people in 2013. And eventually it was like 6 ,000 people in Moscone right before COVID. And then all of that fed into our product and what we built, which we can talk more about. So tell me about what was the community? Obviously, lots of things to work on. what was the community kind of like screaming about that they needed the most in the early days when you were just getting started? Yeah. So when were they asking for something or you kind of throwing different things?

9:31The latter, you know, so that's a tricky thing. I think for people that are like building stuff where it's not like a well-defined need, I think AI is all this now. It's like, okay, people know they need something. They don't know what they need. So it's not like you go ask them what they need because they don't know, right? Like you open AI and Anthropoc don't go and ask customers, what do you need from AGI? Nobody knows. And so the same way, you can do some customer discovery, but you also have to give stuff for them to react to. So you need to know the pain points. For example, a pain point would be, I have a lot of customers.

10:01I don't have enough people. Which customers should I focus on right now? But the way that that works, and should it be workflow, should it be automated? All of that came from companies like Gainsight. You know, there were a few competitors of ours who also are smart. So, you know, we were the ones saying you should do X, Y, and Z. And this is one of the things we'll talk more about category creation. What's crazy is years later, people will be defining their best practices and how they do CS. And they'll be using the terminology from our product and not even be using the product because it became part of the water.

10:34Right. Similar to, you know, you were at Salesforce and like the idea of an opportunity record, a contact record, an account, a forecast, you know, companies like Salesforce and Siebel invented those. And literally some people use them without even knowing that. And that's when you have success. Building on force.com. Yeah. You know, tell me about, you know, was that the right choice at the time? I mean, I know. I mean, obviously I was there when sort of force was kind of getting started. a lot of folks are kind of developing products like, do I build it on another platform? Do I go to control myself?

11:07You decided to do it on force. Tell me about that choice. And when reflecting back on it, would you approach it the same way that you did at the original estate? Yeah. I mean, of course, in life, we never know the counterfactual of what would happen, right? But what I'll tell you is, I've thought about that question a lot. What it allowed us to do is kind of get started with larger customers. So large customers and mid-sized customers don't trust startups in general. What they do trust is their underlying platform technology. And if there's a plug into that platform, it's easier to get them. So our first customers, first 20 or 30 included Workday, DocuSign, Okta.

11:42Those are huge customers, by the way. Yeah, within tech, those are big companies, right? And then later on, that basically gains sites revenue comes from tons of large customers, tons of multi-million, some tens of millions of dollars, right? And it all went back to that first.com decision. So Workday literally was customer number three, four, five. There's no way we get Workday. That's a very, company has a lot of confidential information given what they do. So they're very sensitive. The only reason we got it, they've told us, is because we're on force. And then for folks that don't know, we later, four or five years later, built our own platform, 100 % native, with just a connector to Salesforce, not on the Salesforce platform, much more decoupled.

12:19We had to move all the customers at the time. The benefit of moving the customers was multifold. They would be on our modern product. We also wouldn't have to pay the big royalty because you pay a royalty usually to these platform companies. That was a gigantic and complex project. In fact, when we were built on Force, our chief product officer, he had a friend who knew Salesforce stuff well. And he's like, you will never be able to leave Force.com. And I guess we took it as a challenge. Right, right. And we were able to do it. But not everyone's able to get off the platform. So I would say if you can feel like you can bootstrap off the platform and then move off of it, that's the best of all worlds.

12:58But it's a higher wire act for sure. A lot of founders are listening and kind of wondering about like were you just selling to all your friends? I mean what if you don't have friends that are – like did you have friends that were running customer success teams? Nope. I mean you say there were not that many teams to begin with. Yeah, I actually honestly am super lucky to have a great network of CEOs and people to sell to now. But back then, no, we didn't have them. What we did was really primarily sell to our investors portcos. Just being totally honest. And this happens, you know, hopefully all of you are leveraging your investors very well.

13:36It's one of their value props, you know, getting the intros and things like that. So, yeah, most of our early customers were that. But the other way we got customers was community. These events that we did. Where we would bring people together, not about a product. And it was really not about a fancy event. When I think of event, most founders are thinking, oh, I got to go do a fancy dinner or something like that. I mean, we eventually did the big conference polls and things like that. But so much of it was these small things that cost nothing, like$1 ,000,$2 ,000,$3 ,000. Very, very cost-effective ways to market.

14:08And so, yeah, it was getting people together. And then it's having the long perspective. I think it's one thing I would say I'd encourage people to think about. you know i sometimes see a little bit of the transactional nature i get it when you're in a founder your founder you need something right now right but the more you push a customer that's not ready the more you burn the chance to work with them when they are ready right and you know we've all seen that even in personal lives right some like annoying telemarketer something calls you right and so i think something some stuff that helped us was just like being extremely patient you know some sales cycle took like two years right and i mean box was one of those kind of legendary because like, you know, they were like, you know, they, you know, they're a very high profile SaaS company then and even to this day.

14:49Right. And, you know, I mean, they were like for a year, year and a half, they weren't ready for anything because they built some internal tooling. And then they're like, we want to look at some different solutions, including Gainsight. And then I think we heard at some point, one of our competitors was ahead in the eval or something. And so then I literally just started going there, like, like sitting in their lobby, like, like, I don't know. I'm glad that security didn't escorted me out. Literally, I knew the Wi-Fi password. I knew the front desk receptionist. She was into Disney movies. Literally, to this day.

15:18By the way, at some point, this is how crazy we were. At some point, we made a music video trying to win Box. There's a song from the 90s called What If God Was One of Us. You might remember because you're right. We made What If Box Was One of Us. It was so bad. But the patience, the persistence, don't make it transactional. Was there budget for this stuff? Like, how did you go – you know, a lot of folks are selling something that there is no budget for. No budget, yeah. And so was – how did you go make those early cases? Did you – was it an ROI narrative or was it a, like, hey, I'll just scrap and figure out something?

15:56Like, how did you go about that? So usually what happens is, like, you know, when you're selling it to growing companies, which is a little different than selling mature companies. Growing companies every year, the department budgets are growing somewhat, right? And so the executive, so in our case, let's say customer success leader, they have a budget and they have extra people they need to hire next year. I was just meeting with somebody to open AI and she's like, she's got to hire. I mean, it's an extreme example. She's like, she's got to approve 100 headcount for next year, right? And so one of the things you're competing - It's strictly headcount budget because they didn't have like a line item for like software budget.

16:26But what you're competing with is essentially the executive saying, do I want to hire more people or can I use your software? And so one of the things you can do if it's a growing company is convince the executive this is self-funding, meaning if you buy this, you'll need one less headcount or two less headcount or whatever. So that's a pretty simple ROI case. But I think people don't just buy for ROI. They also buy because they believe. And so the other thing we would do is just trying to understand what are the pressure points. So, for example, I remember one customer where they – we've been talking to them forever.

17:01And then they called us. They're like, we need to buy now. And I'm like, why? They're like, we just lost a huge customer. Our CEO's pissed, right? Another one was like, hey, we need to do this now because we're about to launch a new product. We want to do customer success right from the beginning. And so a key thing is businesses don't buy software purely intellectually and rationally. They often buy it based on like an event or a problem or an issue or things like that. And so a very important thing is to be there when they're in that moment. That's why great salespeople are so important because you want to be there in that moment when the customer's like, oh my God, I cannot take this anymore.

17:39I need to do something different. Right now, everybody talks about founder-led sales. Yeah, exactly. I mean, how long were you doing it yourself before you said, I feel like I understand what I'm trying to do. I understand how we're supposed to sell. Let me go hire folks. Did you hire salespeople right away or how did you go about it? We hired salespeople pretty early. in those early days. And there were some good people there. But frankly, I think most of them weren't able to be successful because it really was us selling. And it's funny because if you ask Gainsight employees, how long was Nick involved in sales?

18:13He'd be like, what was his last day? Literally, I think I was doing sales calls on my last day. Like that level, right? I stepped out from Gainsight last year. And so I love it. I mean, it's great. I mean, it's amazing. A lot of founders are kind of scared about, you know, if you've never done sales, you've never, like, you never carried a quota, never gone through a sales process yourself. For folks that are listening that are kind of building an enterprise software company that are product and technical in nature, they actually have an ROI case around the headcount versus sort of like, hey, you don't need to hire another person.

18:47And what advice would you give to them about, you know, the journey of being a founder that is selling a software into a market that does not exist? I think sales is an interesting profession because people think it's like one thing. But the truth is there's a million different ways to sell. Right? We all know this. I mean, there's a million different types of salespeople that can be successful. At Gainsight, one of our most successful salespeople ever, arguably the GOAT or at least one of the top two or three, is a guy named Adam Wicks. Adam Wicks is in the UK. He did famously our biggest land deal ever at SAP for$6 million a year.

19:23And he beat his quota every single year the entire time I was running the company. It's truly amazing. Everybody's going to ping Adam now, by the way. You should. Adam's super smart. And actually, if you Google it, he did a podcast on some sales podcast, which I listened to. And his thing is he is just immensely curious. and curious both about the business of the customer, but more importantly, the humans at the customer. And this is something people often miss, is humans buy software for their human needs and then they justify it to their business, right? So what are human needs at work? Well, I want to get promoted.

19:59I don't want to get fired. I'm worried about my job. I'm worried about my team. And so Adam would do a great job of really understanding what made each person in these large companies tick. Like, what were they worried about? This is kind of what people would sometimes call the politics, but that's a negative word. It's just humans being humans. And I think that part of sales is just like part of building a product, which is being really curious and learning and studying, you know, and just asking lots of questions. But the most important thing, it's not just about you. So, for example, let's do a role play, right?

20:32if I jump on a call, the bad sales call is, hey, I'm Nick from so-and-so company, I company, and I'd love to learn about what your goals are for our technology right now. And you're like, as a customer, you're like, dude, I have so many other things going on besides your technology, right? Or I'd love to just understand your goals in general. You're like, why am I telling you your goals? Versus, hey, I've seen a lot of people that are VPs of whatever, struggling in our, in our customer, struggling with these issues around AI. And, you know, we've actually brought a community together and, you know, I just want to know if there's ways we can help, if we make introductions, help connect to other people.

21:12I am trying to help. I'm showing I have credibility. I'm showing empathy. I'm trying to help you right away before I've tried to sell you any software. Right. And that's the thing that people, I think a mistake people make is they immediately jump into, let me tell you about my product. First of all, that's great advice. I really think that before any product or anything, there's a human and we got to set them up for success. And we happen to have technology that's going to enable them to do so. One of the things that's been interesting about the Gainsight journey is that now everybody talks about it.

21:41It's a category that sort of has been sort of fairly well-defined. I mean, it's kind of going through its own renaissance right now. So I remember this notion of sort of building the community and then everybody saying, I need to buy customer success software. And everybody talks about, hey, I want to get in a Gartner. I want to create a quadrant. And then everybody wants to be in the quadrant. They want to be in the top right. Tell me about how you thought about that. Was that a goal that you had in mind? Because I feel like some founders say, hey, are you part of an existing category? And most folks will say, I'll try to create a new category.